Key events under Churchill.

R. A. Butler and 'Butskellism'.

Butler was a key figure as Churchill's Chancellor, he almost overshadowed Churchill and he was known as 'the best Prime Minister there never was'.

He was a big influence in the development of modern Conservatism and played a central role in boosting Conservative moral during the Attlee years.

He set the economic policy for the government and accepted Keynesian economics.

He had been resposible for the Education Act of 1944 which was one of his greatest achievements and showed the concern he held for social issues.

He recognised that Labour's deflationary policies had led in the short term to lower costs for British goods, higher levels of exports and an increased demand for British goods - though this was due to an uplift in the international economy.

His ideas were close to that of the Labour party and 'Butskellism' was formed out of this.

3 of 199

Keynesian economics.

Maintaining full employment.

Achieving economic growth.

Expanding the welfare state.

Keeping to Britain’s heavily committed military defence programme.

Developing a nuclear weapons programme.

4 of 199

Age of affluence

From 1952 most economic indicators showed improvement,

Home-ownership was on the rise.

Men's weekly wages were going up.

There was a boom in car ownership.

The most obvious factor that indicated the end of austerity was the surge in ownership of consumer goods such as washing machines or vacuum cleaners.

5 of 199

Age of affluence.

From 1952 most economic indicators showed improvement.

Home-ownership was on the rise.

Men's weekly wages went up.

There was a boom in car ownership.

The most obvious indicator of the end of austerity was the surge in ownership of consumer goods such as washing machines and vacuum cleaners.

6 of 199

Anthony Eden's government.

Conservative Prime Minister.

Was in power 1955-1957.

The Suez crisis was Eden's undoing and he resigned in 1957 from ill health.

7 of 199

1955 election.

Eden called the election as soon as he came into power in May 1955.

The national press overwhelmingly supported the Conservatives.

It was not however a crushing defeat for Labour.

They won a majority of 70 seats, 49.7% of the vote and 344 seats overall.

Labour won 46.4% of the vote and 277 seats.

The Liberals won 2.7% pf the vote and 6 seats.

8 of 199

Suez crisis 1956

In July 1956 Colonel Nasser announced his plans to nationalise the Suez Canal. Eden didn't like this because it posed a threat to British supplies that came through the canal. America and France joined Britain in their attempts to apply pressure to Egypt but Nasser refused to change his mind.

The issue was referred to the UN Security Council but the Soviet Union used its veto against intervention and action against Egypt. Eden began secret discussions with France and Israel and they constructed a plan to launch a strike against Egypt which Eden's cabinet accepted.

On October 29th the Israelis attacked Egypt across the Gaza *****. On the 30th Britain and France offered an ultimatum under the pretense of trying to achieve a ceasefire. On October 31st they invaded Egypt to try to gain control of the canal but pretending that they were encouraging a ceasefire.

America was furious that they had been ignored and condemned Britain, France and Israel.

Eventually because of the lack of US backing Eden made a humiliating withdrawal.

The Soviet Union's involvement in Suez.

On November 5th they issued a formal note to Britain, threatening the use of rockets against the Western invaders.

This threat helped concentrate Eden's mind and was another factor leading to his withdrawal.

10 of 199

Eden's personal role in Suez.

He held Nasser in great disdain.

He did not try to hide his distaste for him.

He did not help his cause with his bad attitude towards Nasser and the situation.

He didn't disguise his annoyance with Eisenhower and the Americans.

11 of 199

Significance of Suez for Britain.

It was not a military loss.

It was a landmark moment because Britain had tried to act independently of the US and NATO, had failed and would never try again.

The pressure from the US to end the Suez mission revealed Britain's financial weakness and dependence on America.

12 of 199

Eden's downfall.

The main cause was foreign affairs which was ironic because he had been the Foreign Secretary previously.

His decisions on military action against Colonel Nasser was disastrous.

Suez was also a political fiasco because Eden ended up appearing weak.

Suez caused a split in the party which ended in a rebellion of nearly 40 Conservative MPs.

The pressure from the US to end the Suez mission revealed Britain's financial weakness and dependence on America.

13 of 199

Harold Macmillan's government.

Conservative Prime Minister.

Was in power 1957-1963.

Resigned in 1963 from ill-health and was followed by Alec Douglas-Home.

14 of 199

Macmillan's move into leadership.

He was not originally seen as Eden's natural successor.

Most people saw R. A. Butler as the most likely successor, but he was detached and had not previously impressed when he stood in for Eden during Suez.

Macmillan managed to rally the cabinet by coming out against Suez but not making it a huge factor.

Butler was not as popular within the party as he was with the country.

Most of Eden's cabinet supported Macmillan but only three supported Butler.

When Macmillan formed his first cabinet he made Butler Home Secretary which hinted at Macmillan's intent to change the party's traditional social attitudes.

15 of 199

1959 election.

Just before the election it was widely believed that Labour had a chance of winning the election.

It was the first election to be held since the Suez crisis which people thought would work against the Conservatives.

There was also a feeling that the budgetary policies that the government was following would also work against them.

However the election came at a bad time for the Labour party.

Third successive Conservative election victory.

Labour made the mistake of declaring that they wouldn't raise taxes, despite the fact that their manifesto contained pledges to increase spending and this led voters to doubt Labour's spending plans.

16 of 199

Economic policy.

Government continued to operate a mixed economy and followed a loose form of Keynesian economics.

They wanted to avoid extreme inflation and if it rose too quickly they introduced measures to slow it down.

The government wanted to encourage more spending and move into a demand-led recovery for the country.

The 1959 budget introduced a range of tax cuts to boost support in the upcoming election.

This led to increased consumer spending and therefor higher inflation.

They then switched to restrictive measures. Tax and interest rates rose, there were cuts in public spending and limits on wage increases were put in place.

17 of 199

Economic policy cont.

This continued until 1963 when, in an attempt to win popularity before the election, there was a move back to expansionist budgetary policy.

Another boom in consumer spending followed and imports had to be increased to support it.

The result was a balance of payments deficit over £800 million by the end of 1964.

Stop-go and stagflation were prominent during this time.

Britain's government seemed to lack a genuine economic strategy.

The government had the lowest GDP growth rate in Western Europe.

Spent 10% of Britain's GDP on defence, with only the USA spending more, and did not invest enough in industry.

18 of 199

Macmillan's Chancellors.

Peter Thorneycroft 1957-1958

Derick Heathcote Amory 1958-1960

Selwyn Lloyd 1960-1962

Reginald Maudling 1962-1964

19 of 199

Unemployment figures.

1957 - 383,000

1958 - 536,000

1959 - 621,000

1960 - 461,000

1961 - 419,000

1962 - 566,000

1963 - 878,000

20 of 199

Britain's decolonisation.

Experienced a sudden rush for independence in the 1950s from the colonies.

The Suez crisis under Eden was the start of this change.

Following this countries quickly started to gain independence:

Ghana and Malaya in 1957.

West Indies Federation in 1958.

Nigeria and Cyprus in 1960.

Tanganyika and Sierra Leone in 1961.

Uganda in 1962.

Kenya in 1963.

21 of 199

Britain's decolonisation cont.

There were some issues when granting independence to the colonies.

In Kenya there was the Mau Mau rebellion. This was mainly over when independence would be granted, though claims by the Mau Mau that captives at the Hola prison camp were being treated brutally damaged Britain.

Britain was left with a debt to India of £1200 million and a debt of £454 million to the other colonies.

Significant policy change followed Macmillan's 'wind of change' speech. The speech was given in 1960 in Cape Town but he was mainly addressing the public at home.

22 of 199

Britain and Europe.

In 1959 Britain formed the European Free Trade Area (EFTA) with linked economies between Britain, Denmark, Norway, Austria, Portugal and Switzerland, but it wasn't that successful.

It was set up to try to combat the EEC.

In 1961 Britain applied for membership of the EEC, following the failure of the EFTA, but was rejected in 1963.

Charles de Gaulle vetoed the application because France was in charge of the EEC, along with Germany, and did not want Britain taking over.

23 of 199

Social tensions within Britain.

Britain was starting to develop as a multiracial society.

In the mid-1950s reactions like 'no coloured' notices in windows of houses and places of work began to occur more.

The main problems were over housing. Immigrants tended to live in poorer areas of the cities which they could afford but a lack of housing created competition between poorer residents and immigrants.

There were similar issues in the job market.

In 1958 riots broke out in Nottingham, Bristol and some of London's poorer districts.

White men went around insulting black residents who often retaliated.

24 of 199

Social tensions within Britain cont.

In August 1958 the Notting Hill riots occurred in London. Around 600 white males tried to break into black owned properties. Prison sentences were placed on the white ring leaders as a short term measure.

The government set up an official inquiry as a response to the riots. The Salmon Report suggested the factors that caused these tensions were:

Sexual jealousy of the black males from the white males, anger of whites at blacks who were willing to work low wages, bitterness at the rise of rents which people attributed to the blacks and the white 'teddy boys' who used violence to become 'heroes' to those whites who were fearful of blacks.

The report said that the riots were a law and order issue.

In response to the racial issues the government tried to control immigration and introduced the Commonwealth Immigrants Act in 196 but this was controversial and many condemned it as racist.

25 of 199

Youth subculture and violence.

First time that consumer products were aimed specifically at teenagers.

There was the growth of the Mods and Rockers culture.

From the mid-1950s there was a crimewave.

Year Total Offences

1950 461,400

1955 438,100

1960 743,700

1965 1,133,900

A prominent example of these crime problems is the Kray twins. They had a reputation for extreme violence, built up a crime empire and associated with celebrities, reaching their crime peak in 1964.

26 of 199

Social policy and living standards.

Wages rose ahead of prices with the average weekly wages for men increasing from £8.30 in 1951 to £18.35 in 1964.

The key factor in this was the growth in real wages and greater access to credit led to a consumer boom.

From 1950 to 1965 the sale of private cars rose from 1.5 million to 5.5 million.

There was also a growth in house buying.

In 1957 the Rent Act led to the abolition of rent control and put six million properties on the market, though it did lead to rising rent prices.

This all created the conditions for a 'property owning democracy'.

27 of 199

Class

The war had weakened class divisions.

The creation of the welfare state had made the well-being of the population a national concern.

Growing affluence had spread wealth across a broad section of society.

The aim of this Conservative government was a socially mobile society,

The availability of financial credit helped blur class lines.

The gap between the rich and poor widened but quality of life was improving for everyone.

28 of 199

The Profumo Affair 1963

John Profumo, the Minister for War, had a sexual liaison with Christine Keeler, a prostitute who had members of the Soviet Embassy among her clients.

It created a huge risk to national security.

In March, Profumo declared in the House of Commons that there was no truth in the rumours, but had to admit he'd lied just three months later.

He resigned but he had disgraced the government and the party.

It was revealed that Profumo met Keeler at Dr. Stephen Ward's brothel at Cliveden.

Dr. War treated many Conservatives so the party was disgraced by association.

Dr. Ward was put on trial and later committed suicide.

29 of 199

The Vassall Affair 1963

John Vassall was a civil servant in the Admiralty who in 1962 was caught spying for the Soviet Union.

The government was obliged to appoint an official investigation into the matter.

There were suggestions that senior Admiralty figures had tried to cover up what had happened.

There was no clear evidence of this but the talk of cover-ups gave the impression that the government was not in control of its departments.

30 of 199

The Philby Affair 1963

In January it was revealed that Kim Philby, a senior official in the Foreign Office, had been passing information to the USSR as well as recruiting agents and running a spy network.

To avoid arrest Philby flew to Moscow and remained there until his death in 1988.

Macmillan's government took the brunt of the blame for the security services failure to notice the traitor.

31 of 199

The Argyll divorce case 1963.

A lurid divorce case where the Duke of Argyll sued his wife, Margaret, for divorce on the grounds of adultery.

Duke Argyll supplied the public with lots of details, including a list of 88 men with whom the Duchess had had ********* with at various times, in various numbers.

The list was said to include two unidentified government ministers, one of whom appeared in a pornographic photo which was shown in court.

32 of 199

Alec Douglas-Home's government.

Conservative Prime Minister.

Was in power for just one year 1963-1964.

He lost the 1964 election and Harold Wilson became Prime Minister.

33 of 199

Succeeding Macmillan.

Most people thought the fight for leadership would be between Butler and Lord Hailsham. Butler was well placed as he had been Home Secretary and Foreign Secretary.

Butler has previously survived the Night of the Long Knives under Macmillan and had then been promoted to the position of Deputy Prime Minister.

However Macmillan disliked Butler and did not want him to be is successor.

Lord Home entered the race as a latecomer. He had been Foreign Secretary and renounced his peerage so he could run.

Macmillan waited to announce his resignation to give Home time to build up his candidacy. When he did resign he included a recommendation for Home to the Queen, and she acted upon it.

Many Conservative MPs resented that Butler had been ignored again and Enoch Powell and Iain Macleod refused to serve under Home.

34 of 199

Harold Wilson's government.

Labour Prime Minister.

Was in power from 1964-1970.

Lost power when Labour lost the 1970 election to the Conservatives and Edward Heath came into power.

35 of 199

1964 election.

Labour presented a more youthful image because Wilson was younger and the party seemed to be more in touch with the young people of Britain.

Wilson played hi Yorkshire background against the aristocratic Home.

He also played on the mood of the time, focusing on talking about the 'white heat of the technological revolution'.

Labour won 317 seats and 44.1% of the vote.

The Conservatives won 304 seats and 43.6% of the vote.

The Liberals won 9 seats and 1.2% of the vote.

It was not a landslide victory for Labour and there wasn't a huge swing towards them.

36 of 199

1964 election cont.

Reasons for their win:

Scandals tainted the Tories.

Home's nomination process made the Conservatives look old fashioned.

Unemployment had reached a high of over 800,000 in 1963.

People were bored of the Conservatives after 13 years in office.

The Labour party presented a youthful image.

Wilson was more impressive in the public eye.

The Conservatives were the main targets of growing satire.

Wilson led a skillful election campaign.

37 of 199

Social reforms.

Race Relations Acts of 1965 and 1968:

Prohibited racial discrimination in public places and in areas of employment and housing.

Made incitement to racial hatred an offence.

Set up Race Relations Board to investigate complaints of racial discrimination.

Set up the Community Relations Commission to promote racial understanding.

The Abortion Act of 1967:

Permitted the legal termination of a pregnancy where two doctors certified there was a serious risk of health to the mother or the strong possibility that the child would be born with serious abnormalities.

It was a highly controversial measure.

38 of 199

Social reforms cont.

The Sexual Offences Act of 1967:

Based on recommendations of the Wolfenden Report of 1958.

Permitted male homosexual acts between consenting adults in private.

Creation of The Office of Ombudsman in 1967:

Appointment of a special parliamentary officer to whom ordinary citizens could appeal if they felt they had suffered from an abuse of authority by a government department.

Theaters Act of 1968:

Effectively ended theater censorship.

Abolition of the Death Penalty in 1969:

Made permanent a measure passed in 1965 that had suspended the operation of the death penalty for an experimental four years.

39 of 199

Social reforms cont.

Divorce Reform Act of 1969:

Allowed couples to divorce on the grounds of the 'irretrievable breakdown' of their relationship.

Creation of the Open University in 1969:

Established to enable previously unqualified students to read for degrees.

Harold Wilson later claimed it was his greatest achievement as Prime Minister.

40 of 199

Roy Jenkins as Home Secretary.

Home Secretary between 1965 and 1967.

Jenkins's support of progressive social thinking created the right atmosphere for reform.

Left such a mark on society that Callaghan, his successor, simply continued the programme.

41 of 199

Involvement in Vietnam.

Britain did not become directly involved in Vietnam.

Throughout the conflict they gave their diplomatic backing to the USA.

Protests led to a riot outside the US embassy in London in March 1968.

This was one of the major criticisms of Wilson's government.

42 of 199

End of Britain's 'East of Suez' bases and commitme

In 1967 Denis Healey, the Defence Minister, announced plans to withdraw British troops from bases in Borneo, Malaya, Singapore and the Persian Gulf.

It was planned to take effect in 1971.

The host governments protested against it.

The USA disapproved because they felt the Cold War meant a greater commitment to world defence was needed.

The government persisted with the plan because bases were a costly expense, Britain's military resources were stretched to the limit, Suez had undermined Britain's confidence on the world stage, it was logical to withdraw following the loss of the colonies and because Britain was still committed to the development of nuclear weapons so could still remain a world power.

The last point caused divisions in the party.

43 of 199

National Plan of 1964.

Drawn up by the new Department of Economic Affairs, headed by George Brown.

Aimed at stimulating industrial production and exports.

Encouraged cooperation between the government, employers and trade unions.

Met few of its grand expansion targets.

It was abandoned by 1967.

Brown often clashed with the Treasury over financial questions.

44 of 199

1966 election.

Labour won 363 seats and 47.9% of the vote.

Conservatives won 253 seats and 41.9% of the vote.

Liberals won 12 seats and 8.5% of the vote.

Gave Labour a 110 seat majority.

The National Plan had sufficiently impressed the electorate, despite its failure.

45 of 199

British economy 1964-1970.

The key priority was modernisation.

There was a deficit of £400 million when Wilson came into office but Wilson was desperate not to resort to devaluation as a solution to economic issues.

In 1966 the government set up the Prices and Incomes Board to implement a policy where government intervention set limits on price rises and called for wage restraint in negotiations.

In 1966 there was another sterling crisis, mainly caused by the strike by the National Union of Seamen.

In 1967 a docks strike caused a sterling crisis that nearly got out of control.

In November 1967 the government decided on devaluation. Wilson first went to the IMF for another loan but it was only a stop gap so devaluation had to take place. It reduced the exchange of the sterling from $2.80 to $2.40. Many perceived it as a political and economic failure and it led to Callaghan standing down as Chancellor.

46 of 199

British economy 1964-1970 cont.

Jenkins replaced Callaghan and used deflationary measures.

He raised taxes and cut government spending.

These were unpopular measures but they were successful.

By 1969 Jenkins achieved a balance of payments surplus.

47 of 199

Labour and the trade unions.

In opinion polls conducted in the 1960s around 60% of people had a favourable view of the unions.

Wilson relied on a good relationship with the TUC.

In 1964 he made Frank Cousins, a trade unionist, Minister of Technology.

In 1966 and 1967 the relationship started to fall apart.

Strikes by seamen and dockers caused big problems for the government.

Many strikes were started by 'wildcat' strikes.

Wilson and Barbara Castle, the Employment Minister, started planning to use the law to limit unofficial strikes.

This resulted in the white paper, In Place Of Strife.

48 of 199

Labour and the trade unions cont.

The white paper was produced in January 1969 and it aimed to strengthen the unions in terms of dealing with employers.

However the proposals that there would be a 28 day 'cooling off' period before a strike, that the government could impose a settlement when unions were in dispute with each other and that strike ballots could be imposed were seen as too radical.

Voters liked it and Labour's standing rose.

Unions and the Left hated it.

There were several protests from unions and MPs including James Callaghan, the Home Secretary.

Eventually Wilson gave in to the revels.

The TUC negotiated a compromise in June 1969 but Labour was already damaged.

49 of 199

Application to join the EEC in 1967

Economic issues were rising in Britain so Wilson decided to apply to join the EEC following the vetoed attempt in 1963.

The party was still divided over the issue but Wilson went ahead.

When the government made its formal request they had the full backing of the Conservatives and Liberals but 36 Labour MPs opposed it.

De Gaulle once again vetoed the application, despite the annoyance of the five other members of the EEC.

50 of 199

Edward Heath's government.

Conservative Prime Minister.

Was in power 1970-1974.

Lost the 1974 election and Wilson came to power again.

51 of 199

1970 election.

Wilson believed that despite problems within the party and outside unrest Labour still had a solid support base.

Despite his dismissal, Enoch Powell's 'rivers of blood' speech won the Conservatives 2.5 million votes.

The switch of 18% of Labour Powellites and 24% of Liberal Powellites to the Tories probably won them the election.

The Conservatives won 330 seats and 46.4% of the vote.

Labour won 287 seats and 43.0% of the vote.

The Liberals won 6 seats and 7.5% of the vote.

52 of 199

Industrial Relations Act of 1971

An extension of Castle's In Place Of Strife proposition.

Introduced the concept of 'unfair industrial practice'' which restricted workers' rights to strike.

To retain legal rights, unions had to be on a government register.

Heath appointed John Davies as head of the new Department of Trade and Industry in an effort to give more free reign to market forces.

Davies was not conventional, in that he came from outside Parliament. He had been head of the Confederation of British Industry.

53 of 199

Issues with the trade unions.

The government had to abandon its policy of no interference in industrial matters.

Heath appealed to the unions to try to solve the issues alongside him and Confederation of British Industry.

The unions however were suspicious and hostile.

When the Act had been passed in 1971 the TUC had resisted by appealing to unions to refuse to register. No unions registered so it was impossible to enforce the Act.

Heath and the cabinet looked incompetent.

In 1972 the National Union of Miners called a strike which brought the movement of coal to a standstill through flying pickets.

It disrupted fuel and electricity supplies and reduced industrial production.

Heath didn't want to give in to the miners so in 1973 he introduced the three day week.

54 of 199

Issues with the trade unions cont.

In the three day week the use of electricity in most industrial and commercial premises was limited to three days a week.

The blackouts that occured did not endear people to either the miners or the government.

The dispute was eventually ended the miners won a 21% wage increase.

The whole affair was a major defeat for Heath.

In 1974 the NUM went on strike again, wanting further wage rises.

The strike led Heath to call the 1974 election.

55 of 199

Economic policy.

Anthony Barber was the Chancellor of the Exchequer following Iain Macleod's death in 1970.

Barber's early measures were cutting income taxes, reducing government spending and the abandonment of the Prices and Incomes Board. One of the most unpopular cuts was the withdrawal of free school milk for school children, pushed through by Margaret Thatcher.

Labour criticised the government for abandoning a mixed economy, weakening the welfare state, undermining the principle of full employment and putting economic efforts before social improvements.

Inflation had risen to 15% by the end of 1971.

In 1972 the government returned to a policy of controlling prices and incomes in an effort to reduce inflation.

Rolls Royce was struggling but the government went against their policy of no interference to nationalise it and sustain it through government grants.

56 of 199

Local government reforms

The Local Government Acts of 1972 and 1973 was one of Heath's most significant measures.

It was prepared and introduced by the Environment Minister, Peter Walker.

They were sweeping reforms.

They reshaped the structure of local government.

Destroyed many historical administrative landmarks with newly created regions and many place names disappearing.

There were protests that the reforms were an attack on local identity.

57 of 199

Britain's entry into the EEC.

In 1969 De Gaulle retired and the EEC invited Britain to reapply.

In 1972 Britain signed the Treaty of Accession and became a full member at the start of 1973.

Heath saw it as his greatest achievement, as he had been committed to it since Macmillan assigned him the role of special negotiator with Europe in the 1950s.

Heath was so eager to comply with the conditions of entry he told his officials to accept any terms.

The other six members of the EEC knew Britain had reapplied because economically they could not survive on their own.

Britain could not negotiate from strength.

One of the most significant conditions Britain accepted was that Commonwealth food and goods would no longer enter Britain on preferential terms.

Britain had to sacrifice its economic relationship with the Commonwealth.

58 of 199

Advantages of joining the EEC.

Access to European markets.

Stood a better chance of attracting foreign business.

Entitled to European development grants.

British workers had the right to work in other EEC countries.

59 of 199

Disadvantages to joining the EEC.

No longer able to buy cheap food from the Commonwealth.

Britain was classed as an advanced industrial economy so had to make higher contributions to receive European grants.

British consumers ended up paying inflated prices for food.

The Common Fisheries policy restricted the right to fish in Britain's customary grounds and essentially destroyed the UK fishing industry.

Britain had to impose VAT on most commodities which began at 8% in 1973 and later reached 17.5%.

The EEC was a protectionist organisation that was looking dated in the growth of global markets.

60 of 199

International oil price rise of 1973.

Up until the early 1970s oil production and distribution had been controlled by large, multinational companies and was relatively cheap.

But from the early 1960s the Organisation of Petroleum Exporting Countries (OPEC) members began to gain greater control over their own oil industries.

The OPEC was formed in 1961, to represent all the leading oil producing nations and included the important Arab states of Bahrain, Iraq, Kuwait, Libya and Saudi Arabia.

In 1973 the Arab members used oil as their weapon in the long conflict with Israel.

In retaliation for the West supporting Israel in the Arab-Israeli War fought in October 1973, the Arab members dramatically reduced their oil supplies to Western countries.

They also raised the price of oil exports from $2 a barrel in 1973 to $35 a barrel by 1980. The result of this was rapid and severe inflation and for the following decade Britain suffered a terrible recession.

61 of 199

Economic effects of the oil price rise.

Balance of payments deficit rose to £1 billion.

Annual inflation rate rose to 16%.

The value of the sterling dropped from $2.00 to $1.57.

Interest rates rose from 15%.

Record budget deficit occured.

1974-1976 unemployment figures doubled to more than 1.44 million.

62 of 199

Northern Ireland.

In 1969 and 1970 there was serious sectarian violence.

Wilson's government had sent in the British army to keep peace.

The Conservatives had always had ties with the Ulster Unionists but Heath felt like he had to force the Unionists to accept change.

In 1971 Heath followed the Belfast government's leader, Brian Faulkner's policy of internment.

The policy proved ineffective and alienated nationalist communities.

The British Army became to be seen as an enemy in Northern Ireland.

In January 1972 Blood Sunday occurred.

Heath suspended the Stormont Parliament and ruled directly from Westminster.

In 1973, along with Willie Whitelaw, Heath achieved the Sunningdale Agreement.

63 of 199

Northern Ireland cont.

The Agreement proposed a complex plan for a power-sharing government.

Extremists on both sides hated it.

The Agreement was undermined by the political crisis in Britain and it collapsed.

64 of 199

Economic modernisation.

Heath had a great commitment to economic modernisation.

However the government encountered many issues.

Inflation did not bring economic growth and unusually for a time of high inflation, unemployment was high too. This is known as stagflation.

Had little success with the economy.

65 of 199

Harold Wilson's government.

Labour Prime Minister.

Was in power from 1974 to 1976.

Retired in 1976 and James Callaghan took over as Prime Minister.

66 of 199

February 1974 election.

Heath called an election when the NUM went on strike again in 1974, on the issue of who ran the country the miners or the government.

Labour won a majority of just 4 seats but with the support of the 14 Liberal MPs they managed to form a government.

Labour won 301 seats and 37.1% of the vote.

The Conservatives won 297 seats and 37.9% of the vote.

The Liberals won 14 seats and 19.3% of the vote.

Both Labour and Conservatives lost support but the Liberals gained 4 million votes.

Heath was judged as a failure, since his government had achieved none of its economic goals.

Inflation made keeping prices down impossible.

67 of 199

February 1974 election cont.

Demands of the Unions resulted in a decline of productivity.

Unemployment had not been reduced.

The three day week especially showed up the government.

68 of 199

October 1974 election.

As soon as Wilson felt safe in his leadership he called another election to widen his majority.

Labour gained 18 seats, bringing them to a total of 319 seats.

The Conservatives lost 21 seats, bringing them to a total of 277 seats.

Labour had a 42 seat lead over the Conservatives, but a majority of just 3.

The narrow Commons majority, which was never more than three seats, meant that Labour was heavily dependent on the Liberal MPs and in 1977 they formalised the Lib-Lab pact.

69 of 199

Inflation.

Suffering from the effects of the oil price rise.

The value of money was falling and the trade debt was growing.

In March 1976 the pound dropped below the dollar in exchange value, the lowest ever.

70 of 199

Labour and the Unions.

One of the first things Wilson did was abolish the Industrial Relations Act and the pay board.

The government gained some credit for abolishing the Act.

For a bit the government and Unions were on good, cooperative terms.

Wilson was on good terms with Jack Jones, the leader of the TGWU.

71 of 199

Referendum on Europe in 1975.

The Left of the Labour Party and the Trade Unions were suspicious of the European Common Market, so in an effort to keep up good relations Wilson opted to negotiate the terms of Britain's membership of the EEC.

MPs were under no instructions from their parties which side to take which led to lots of cross-party divide.

When the referendum took place people "voted more out of fear of the consequences of leaving than out of enthusiasm for remaining in" - Martin Pugh.

The 'Yes' vote won 64.5% of the total UK vote.

72 of 199

Referendum on Europe in 1975 cont.

Opponents argued that it was undemocratic as it should have taken place before entering Europe, not after.

They also pointed out that the 'Yes' campaign had been funded by the EEC so had a lot more money at its disposal.

The 'Yes' campaign had focused on the economic benefits the EEC would bring but the oil price rise and its efforts outweighed any gains that may have been made.

The British people were kept in the dark about Europe and were consistently told that there were no political attachments, only economic.

73 of 199

Wilson's retirement in 1976.

Some believed he retired before the economic situation got any worse than it already was.

It was probably a result of the strains of office.

James Callaghan succeeded him as Prime Minister.

74 of 199

James Callaghan's government.

Labour Prime Minister.

Was in power from 1976 to 1979.

Lost the 1979 election and Margaret Thatcher became Prime Minister.

75 of 199

The IMF crisis of 1976

In September the Chancellor of the Exchequer, Denis Healey, was negotiating a £3 billion loan from the IMF to combat the effects of the oil price rise.

The terms were for Britain to make major public spending cuts.

The Left of the party and the Unions were outraged.

In October, Healey had to rush to the Labour Party conference to try to preserve party unity over the IMF loan. He only had partial success.

This truly showed the hard split in the party.

Callaghan handled the crisis well and eventually the economy recovered.

By 1979 spending had been cut by £3 billion but unemployment increased to 1.6 million by 1978.

Many saw the IMF loan as a measure of Britain's decline.

76 of 199

Industrial unrest.

There was scarcely a time when there weren't strikes.

Callaghan angered Unions and this led to more sweeping demands and more aggressive methods.

The term 'British disease' was coined by foreign journalists. It described the bad employer-worker relations and constant industrial stoppages.

Some of the most prominent examples of industrial action were:

A fireman's strike in 1977 which led to a state of emergency.

A year long strike in 1977 at Grunwick photographic works which involved mass picketing and violent clashes with the police.

In September 1979 all 23 plants of Ford Motors which was only settled when a 17% pay rise was granted.

In January 1979 a lorry drivers' strike threatened the country's food supply and was only called off when granted a 20% pay rise.

77 of 199

Strike record 1976-1979.

1976 - 2,016 strikes 3,284,000 working days lost.

1977 - 2,627 strikes 9,985,000 working days lost.

1978 - 2,349 strikes 9,306,000 working days lost.

1979 - 4,583 strikes 29,474,000 working days lost.

78 of 199

The Winter of Discontent 1978 - 1979.

There was increased militancy among public sector workers during these strikes.

The public sector Unions did not want to miss out on the large pay settlements being granted to the private sector Unions so they began to make demands as well.

This intensified the industrial unrest and led to the Winter of Discontent.

An alliance of pubic service Unions, including the National Union of Public Employees (NUPE) and the Confederation of Health Service Employees (COHSE) called for a day of action.

On the 22nd January around 1.5 million workers went on strike.

Following this selective strikes were organised in areas to grab media attention.

School meals were disrupted, dead bodies were left unburied, refuse piled up uncollected and the media portrayed a collapsing, rotting Britain.

79 of 199

Callaghan's failures.

He hadn't met the public's expectations.

He alienated large sections of Labour's natural supporters.

It made economic matters worse by allowing things to drift.

He failed to call an election in late 1978 when the polls showed he had support.

Some felt his leadership style was too relaxed and therefore the Winter of Discontent occurred.

80 of 199

Margaret Thatcher's government.

Conservative Prime Minister.

Was in power from 1979 to 1990.

Resigned in 1990 and John Major took over as Prime Minister and Conservative Party leader.

81 of 199

1979 election.

By the time Callaghan called the election his government's reputation was damaged by the economic crises, rising unemployment, industrial unrest and political misjudgements.

They had allowed the Lib-Lab pact to lapse in 1978 and became reliant on the SNP but lost their support when the March 1979 referendum in Scotland failed to provide a mandate for devolution so the government dropped the proposal to introduce it.

With the loss of the SNP support the government was given a vote of no confidence on March 28th 1979.

The election was more about Labour losing than the Conservatives winning.

Despite all of Labour's failures it was not a landslide victory for the Conservatives.

82 of 199

1979 election cont.

The Conservatives won 339 seats and 43.9% of the vote.

Labour won 269 seats and 36.9% of the vote.

The Liberals won 11 seats and 13.8% of the vote but Northern Irish parties won 12 seats but only 2.2% of the vote.

The SNP won 2 seats and 1.6% of the vote. Plaid Cymru also won 2 seats but 0.4% of the vote.

83 of 199

Thatcher's first government 1979-1983.

It took Thatcher time to establish dominance over the party.

Her first cabinet contained a lot of 'wets', people who Thatcher and her supporters felt were soft and squeamish about the social consequences of monetarist economic policies.

It also contained 'dries', those who were firm in their support of monetarism.

She appointed Willie Whitelaw her Home Secretary, Lord Carrington as Foreign Secretary and Michael Heseltine as the Minister of the Environment.

She ensured that the key posts, especially those involved with the economy were held by people she trusted. Geoffrey Howe was made Chancellor, Sir Keith Joseph was the Minister of Industry and John Biffen and Nigel Lawson held other key economic posts.

One exception to this trend was the Minister of Employment, Jim Prior, who was a Heathite and many predicted tensions between Prior and Thatcher.

84 of 199

Ending the post-war consensus.

The Conservatives' majority of 43 seats was enough for Thatcher to embark on a policy of radical change.

She intended to return to the principle of individual accountability. She felt the state shouldn't reward the incompetent as it was bad social practice.

She was critical of Heath because she felt he had pushed Britain further towards socialism than Labour had.

85 of 199

Economic revolution.

Thatcher set herself three economic objectives when she came into power in 1979:

1. Reversing Britain's economic decline.
2. Policies had to be carefully costed and if they didn't fit the plan then they would not be approved.
3. Intended to achieve a fundamental change, no matter how hard it was.

She wanted to change the economic basis on which Britain was run as she felt the earlier consensus politics had led Britain into bad social and economic habits.

The problems she identified were:
High levels of government spending which led to borrowing, excessive taxation and inflation.
Unnecessary government interference into the running of the economy.
The growth of bureaucracy meant civil servants were intruding.
A combination of weak managements and strong unions which resulted in continual increase in wages but a decline in productivity.

86 of 199

Economic revolution cont.

Thatcher's economic policy was an attempt to reverse the harmful economic trends which she believed governments since 1945 had instilled.

Thatcher focused on the restoration of the free market, an economic system in which the forces of supply and demand are allowed to operate naturally without government regulation, to replace the Keynesian system which the government since 1945 had followed.

She first had to tackle inflation to follow these policies.

87 of 199

Monetarism.

Thatcher's government adopted monetarism in an effort to reduce inflation.

Thatcher began to cut government spending to try to reverse the position in which Britain Public Sector Borrowing Requirement (PSBR) was always in deficit.

Interest rates were kept at a high level to discourage irresponsible borrowing and to keep the pound strong on the international market.

Geoffrey Howe reduced the basic rate of income tax from 33% to 30% and the top rate from 83% to 60%.

VAT was increased which reflected the Thatcherite belief that people shouldn't be taxed on income or property, but rather the goods and services they chose.

The success of these measures was shown by inflation dropping from 19% in 1979 to 5% in 1983.

However the reduction in inflation came at a price of rising unemployment.

88 of 199

Monetarism cont.

By 1980 the country was in the grips of an economic recession and inflation was still high, 15% in 1980, and unemployment rose to above 2 million. This was the return of 'stagflation'.

The 1981 budget applied monetarist policies such as taxes on petrol, cigarettes and alcohol going up but these deflationary policies made the recession worse.

Steel production was cut by 30% to less than 14 million tons and many industrial plants were closed down permanently.

89 of 199

Unemployment in Britain 1980-1989.

1980 - 2,244,000 unemployed

1981 - 2,272,000 unemployed

1982 - 3,097,000 unemployed

1983 - 3,225,000 unemployed

1984 - 3,284,000 unemployed

1985 - 3,346,000 unemployed

1986 - 3,408,000 unemployed

1987 - 3,297,000 unemployed

1988 - 2,722,000 unemployed

1989 - 2,074,000 unemployed

90 of 199

Social unrest.

In April 1981 in Brixton hundreds of black youths went on a rampage and the police had great difficulty controlling it.

In July there were similar riots in the St. Paul's region of Bristol, the Toxteth area in Liverpool and Moss Side in Manchester.

They were generally seen as a reaction to Thatcher's tough monetarist policies that had led to increasing unemployment.

Common factors that caused the riots were:
Poor job prospects in the deprived inner-city area.
Alienation of young black people who felt they were alienated against by the authorities.
The high incidence of unemployment among school leavers.

The government often see the rioters are political troublemakers.

By 1982 the mounting economic and social problems threatened Thatcher's chance of re-election. Opinion polls showed her popularity dropping.

91 of 199

Background to the Falklands War 1982.

During the war Thatcher was provided with a fantastic opportunity to prove herself. She was a brilliant war leader and her commanding conduct and demeanor added to her reputation and helped her popularity.

The legal ownership of the islands had long been a disputed matter between Argentina and Britain, but in 1982 98% of the islanders wished to remain under the British flag, a point that Thatcher constantly reiterated.

On 2nd April 1982 General Galtieri, the Argentine dictator, ordered the seizure of the Falklands and 4000 troops invaded the islands, overcoming the resistance of 80 Royal Marines.

This aggression was condemned by all parties in Britain but the Labour opposition wanted the British response to be channeled through the United Nations whilst Thatcher was adamant that it was a British matter to resolve.

Thatcher immediately ordered the retaking of the Falklands.

92 of 199

The Falklands conflict April-June 1982.

On 8th April a British task force sailed from Portsmouth and Southampton.

On 25th April South Georgia, which had also been seized by Argentina, was recaptured.

On 1st May air strikes began against the occupying forces on the Falklands.

By the 2nd May Britain had placed a 200 mile exclusion zone around the islands and began its naval campaign.

The Argentine cruise Belgrano was sunk by a British submarine, an action that caused considerable controversy in Britain. Opponents of the war claimed that Thatcher had personally ordered the Belgrano to be torpedoed despite the fact that it was sailing out of the exclusion zone at the time.

Thatcher's defence of the sinking was that in a war situation the Belgrano was a threat to British personnel regardless of their position.

93 of 199

The Falklands conflict April-June 1982 cont.

Two days after the sinking of the Belgrano HMS Sheffield was destroyed by an Argentine Exocet missile. Subsequently two British frigates were also destroyed and other damaged in air attacks.

The Royal Navy prepared the way for British troop landings to start on the 21st May. By the end of May, two key areas of San Carlos and Goose Green had been recaptured.

The climax of the conflict came with the liberation of the capital, Port Stanley, on the 14th June. Following this Argentina surrendered.

The conflict claimed the lives of 255 British and 665 Argentine servicemen.

People likened Thatcher to Churchill in her ability to inspire the nation in wartime.

Having regained the Falklands through force, Britain established a permanent position on the islands to guarantee their security.

94 of 199

The political benefits of Falklands for Thatcher.

The Falklands conflict carried Thatcher to victory in the 1983 election.

The opposition who had opposed the military action found themselves in the position of trying to attack the government whilst at the same time supporting the servicemen actually fighting in the war.

This proved impossible and Michael Foot and Neil Kinnock suffered a dip in their popularity.

95 of 199

The miners' strike 1984-1985.

Thatcher insisted that the nation paid its way which meant that subsidies would not normally be used to help ailing industries, a practice which Heath had employed which she had criticised him for.

She argued that public subsidies came from the public purse by definition, and that some other area would be deprived of resources to pay for failing areas.

It was arguments like these that were at the heart of the government's dispute with the miners, coming to a head in 1984.

Throughout the century the British coal industry had been in recurrent crisis. Coal was increasingly costly and difficult to mine and nationalisation in 1948 had not helped. There was a case for saying that the lack of government investment had added to the problem.

For a while Britain had been importing coal from abroad and with the exception of a few pits British mines were running at a loss by the 1970s.

96 of 199

The government's case for pit closures.

The government under Thatcher declared its unwillingness to put further public money into an industry which had little chance of being able to recover in a competitive market.

Her argument was that not to take hard measure when necessary simply delayed the inevitable.

97 of 199

The miners' case against closures.

The miners' Unions advanced a strong counter-argument against Thatcher.

They argued that with a proper investment programme backed by a genuine government commitment to coal as a long-term power source, large parts of the British coal industry still had a profitable future.

They also pointed out that the social consequences of pit closures would be catastrophic as in areas such as South Wales, Yorkshire and Durham coal mining was a way of life, with whole communities dependent on it.

98 of 199

The role of personalities in the dispute.

The National Coal Board (NCB) had recently appointed Ian McGregor as its chairman, whose remit was to cut out the non-profitable parts of the coal industry.

The National Union of Mineworkers' leader, Arthur Scargill, was McGregor's opponent and was equally determined to resist pit closures.

The government claimed to be neutral in the dispute and concerned solely with upholding law and order but in reality it fully backed McGregor and the NCB.

It can be argued that the government deliberately encouraged a showdown with the miners as part of its plan to bring the trade unions under control.

The government anticipated a prolonged strike and made plans. The Employment Minister, Norman Tebbit, had already put through two Employment Acts in 1980 and 1982 which were the first steps towards reducing union power.

99 of 199

The role of personalities in the dispute cont

The measures included:
Forbade mass picketing.
Outlawed the 'closed shop', the requirement that all workers in a particular plant or factory had to be union members.
Declared industrial action illegal unless the workers had voted for a strike in a formal union ballot.

The government also started stockpiling coal and coke at power stations and putting together emergency plans for importing further stocks if they were needed.

The strike began in 1984 and lasted a year and saw violent clashes between striking miners and the police.

The worst of these was the 'Battle of Orgreave' in June where strikes tried to prevent coke lorries leaving a British Steel coking plant in Orgreave. An estimated 6000 pickets struggled for hours against around 5000-8000 police before finally being overpowered. 93 arrests were made and 51 strikers and 72 policemen were injured.

100 of 199

The role of personalities in the dispute cont

Scargill's NUM never had any real hope of success. They were weakened by breakaway miners who remained at work and by the refusal of key Unions, such as power-station workers, to join the struggle.

The strike eventually petered out early in 1985 and it left a legacy of bitterness and recrimination.

The miners' defeat marked a major success for the government's anti-union campaign and it encouraged other employers to begin resisting union demands. Worker power was on the decline.

This was evident in 1986 in the failure of the print workers to prevent Rupert Murdoch from obliging them to accept new technology and modern work practices.

Since the miners and the print workers were arguably the strongest unions in Britain, their defeat marked a major success for Thatcher's industrial policies.

It also strengthened Thatcher's resolve to overcome the other forces in Britain such as irresponsible local governments.

101 of 199

Reasons for the defeat of the strike.

Scargill's abrasive manner alienated other Unions within the mining industry with the result that the strike was never solid. The notable example of this was the Nottinghamshire miners who defied Scargill's appeals and threats and they continued working throughout the strike.

Scargill's persistent refusal to hold a ballot of the NUM members made it appear that he was undemocratically forcing his Union into a strike.

Few other trade unions were willing to support the strike.

The strikers claimed it was heavy-handed police action that started the violence but the broad public perception was that it was the strikers who were most at fault. Public opinion became largely pro-government.

The government which backed the NCB throughout had made careful preparations to maintain essential fuel stocks and supplies.

Norman Tebbit's Employment Acts gave the NCB and the government powerful restraints against the striking miners.

102 of 199

Reasons for the defeat of the strike cont.

The Labour opposition did not perform well. Although some on the Left wholly supported the strikers, Kinnock tried to take a middle path condemning violence but being sympathetic to the strikers' cause.

The police forces involved were largely successful in enabling strike-breakers to get into work and delivery lorries to get through picket lines.

Coal was no longer the vital fuel source for ordinary people the way it had been in previous generations. The strike, therefore, never made the impact the strikers had hoped.

Since coal was of declining industrial importance there was a sense in which the strike was a hopeless act. It seemed to belong to an age that had passed.

103 of 199

Impact of the miners' strike.

The scenes of violence between strikers and police regularly seen on television shocked the nation and divided public opinion. Polls suggested that 65% of people supported the government and police whilst 35% supported the miners. Some said these figures reflected the divide in the nation at large between the people who lived and worked in areas of declining industries and those whose livelihoods no longer depended on the old staple industries.

Social commentators suggested that the violent clashes that frequently accompanied the strike stimulated a general lawlessness in Britain as evidenced by further riots in some cities in 1985.

The failure of the strike allowed the planned closures to go ahead at a greater speed. The result was job losses, redundancy, social disruption and the decline of traditional mining communities.

The violent nature and the ultimate failure of the strike convinced the majority of people that action of this kind was no longer an appropriate way of settling industrial issues in modern Britain.

104 of 199

Impact of the miners' strike cont.

The failure of the miners gave heart to employers who wanted to convert their workers into accepting modern ways and new techniques.

Since the NCB's victory was really the government's victory, Thatcher was encouraged to think that other opponents could be defeated if the government kept its sense of purpose and determination.

105 of 199

Supply-side economics

The severity of the recession obliged the government to modify its financial policies.

Monetarism was never formally dropped as a policy but from the mid-1980s it was practically abandoned.

In its place the government started pursuing supply-side economics. This approach was based on the belief that Keynesian policies had distorted the operation of the economy by attempting to create demand artificially.

Supply-side economists argued that a return to incentives was the way to go, for example rewarding people for working harder and more productively by allowing them to keep more of their wages.

They believed that this would help stimulate the economy.

The turning to supply-side economics marked a shift of emphasis rather than a basic change in Thatcher's original policies. It was still part of her broad aim of establishing the free-enterprise economy.

106 of 199

Policies of supply-side economics.

Reducing taxation to provide employees with an incentive to work.

Encouraging competition in order to lower prices.

Limiting the powers of the trade unions so that they could no longer block productivity or prevent the modernisation of industry.

Cutting wasteful welfare payments as a way of saving public money and reducing dependency.

107 of 199

Deregulation.

A move towards a free-enterprise economy was made with the introduction of the policy of deregulation.

This was an effort to remove the financial and legal restrictions that Thatcher believed prevented efficiency and profitability.

Chief measures in the programme included:

Finance - credit and exchange controls were abolished.
Transport - bus companies were deregulated to encourage competition.
Education - schools were entitled to opt out of the state sector and become responsible for their own financing.
Hospitals - required to operate an 'internal market' by taking control of their own finances and matching needs to resources.
Housing - council house tenants were given the right to buy they homes they were renting.

108 of 199

Privatisation.

The measures of deregulation were complemented by a policy of privatisation.

The policy provided the Treasury with large additional funds and aimed at increasing 'popular capitalism' by giving a chance for ordinary people to become shareholders.

Between 1979 and 1990 the number of shareholders in Britain increased from 3 million to 9 million.

50 enterprises were sold off during the Thatcher years.

Some of the largest enterprises sold off during the Thatcher years were:
British Airways
British Steel
British Coal
Cable and Wireless
British Telecom
Regional electricity and water boards

109 of 199

Privatisation cont.

Financial deregulation encouraged banks and building societies to advance larger loans to customers.

A significant part of the money borrowed was then spent on consumer goods from abroad.

The results of this was that between 1980 and 1989 Britain's balance of payments deficit rose from £16 billion to £47 billion.

North Sea oil.

One of the most controversial privatisation measures was the selling off of North Sea oil.

In 1976 the Labour government had established the British National Oil Corporation (BNOC) as a means of keeping North Sea oil under public control.

Thatcher's government sold off its majority shareholdings of the North Sea oil in 1982.

The government argued that despite the considerable revenue gains for Britain since 1976 due to the BNOC world oil prices in the 1980s had entered a period of long-term decline.

Critics rejected this argument, claiming that Thatcher's government had squandered a national asset for short-term gain.They saw deregulation as part of a broader irresponsibility on the government's part that threatened to destroy large parts of Britain's industrial economy.

111 of 199

North Sea oil cont.

Figures showing a marked fall in the numbers of those employed in British manufacturing industries seemed to back up this argument.

Number of industrial workers in Britain 1970-1990:

1970 - 9 million

1980 - 7 million

1990 - 4 million

112 of 199

The debate over deregulation and privatisation.

Defenders of the government argued that the shift in employment, away from manufacturing, was part of a necessary modernising process.

The firm measures adopted by the government obliged British industry to shed the wasteful practices and overmanning that had formerly hindered it.

Streamlining and cost-effective techniques resulted in higher productivity since fewer workers were involved.

Those who had lost their jobs were unimpressed by the figures that showed that between 1979 and 1989 manufacturing productivity grew at an annual rate of 4.2%, the highest growth rate in Britain's industrial history and way ahead of Britain's European partners.

The growth of small businesses in Britain partly explains why by 1990 there were much lower unemployment rates than the other countries in the EU, in spite of the industrial recession Britain experienced in 1981 and 1987 that caused a serious balance of payments deficit in the late 1980s.

113 of 199

The debate over deregulation and privatisation con

Throughout the period of the Thatcher government North Sea oil brought billions of pounds into the Treasury.

It was this rather than genuine economic growth the funded the unemployment and benefit payments that the recession necessitated.

Critics of Thatcherism claimed that it was this revenue that made possible the income tax cuts in which the government took great pride.

A combination of North Sea oil and privatisation saved Thatcher's government from bankruptcy enabling it to overcome the recessions that the monetarist policies had created.

The high point of oil income came in 1985 but government continued to draw considerable revenue from North Sea oil until 2007 when income began to decline.

UK's balance of payments record (in £ millions) 19

Taxation under Thatcher.

One of the government's proudest boasts was that the Thatcher years were a period of low taxation.

However although there was a significant reduction in income tax rates during Thatcher's time in office, the overall tax bill for ordinary people had not greatly altered.

This was due to to increases in indirect taxes such as National Insurance contributions, VAT and local rates.

116 of 199

The Westland affair in 1986.

In 1986 a Cabinet dispute indicated that there were times when total unanimity did not prevail in the government.

Westland was an ailing British helicopter company which Michael Heseltine, the Defence Secretary, proposed to save it by making it part of a European consoritum which would include British Aerospace.

Leon Brittan, the Industry Secretary, however put forward the alternative idea which involved the takeover of Westland by a US company, Sikorski.

Thatcher chose to back the Sikorski, and Heseltine stormed out of the cabinet. His resignation on January 9th was followed two week later by Brittan's when it was revealed that his Department of Industry had put pressure on British Aerospace to withdraw from the European consortium.

The affair left nobody with any credit.

Critics suggested that the affair showed two unattractive aspects of Thatcher's style of government: bullying of the Cabinet and subservience to the USA.

117 of 199

The 1987 election.

The internal squabble over Westland did not greatly harm the government's standing with the voters.

The results showed some recovery by the Labour party but the government still maintained its share of the popular vote and still had an overall majority of 100 in the Commons.

The Conservatives won 375 seats and 42.2% of the vote.

Labour won 229 seats and 30.8% of the vote.

The Liberals/SDP won 22 seats and 22.6% of the vote.

118 of 199

Local government reforms.

Thatcher used her electoral success as a mandate for pressing on with her reforming policies, especially those in regard to local government.

In 1988 a series of changes in local authority finances were introduced.

A system of Standard Spending Assessments (SSAs) were introduced that enabled the central government to control local government expenditure levels.

Councils were also required to adopt 'compulsory competitive tendering' (CCT) to contract out their services to the companies that could provide the best service at the lowest prices.

The government intended for these measure to be accepted by the public because the financial changes would create 'more gainers than losers'.

For Thatcher the financial adjustments were a further step in her plan to bring the local governments into line with her ideas of public accountability. Thatcher believed that public institutions had to be more responsive to the needs of the people.

119 of 199

Local government reforms cont.

Thatcher knew that many local governments were unpopular.

Only a minority of people voted in local elections and this allowed extreme socialist groups to dominate areas such as London boroughs and the city councils in Liverpool and Manchester.

These were among the high-spending 'loony left' Labour authorities that she had successfully attacked by breaking up the metropolitan councils and abolishing the Greater London Council (GLC) in 1983.

120 of 199

Education.

Thatcher also saw the 1987 victory as a mandate for the most significant educational reform since the 1944 Butler Act.

The Education Reform Act of 1988 had essentially the same purpose as her local government reforms, to make the service provided more efficient and responsive to the needs of the consumer.

It was introduced by Kenneth Baker, the Education minister.

121 of 199

Provisions of the 1988 Education Reform Act.

The principle of Local Management of Schools (LMS) was introduced, under which schools were entitled to free themselves from direct financial control by the Local Education Authority. School budgeting could now be taken over by the head teacher and the school governors.

Primary and secondary schools could also opt to become Grant Maintained Schools (GMS) which allowed them to become independent of their Local Education Authorities and be financed directly by central government.

Secondary schools could restore some element of selection at 11 plus.

A National Curriculum was introduced, containing 'core' subjects, such as English and maths, and 'foundation' subjects such as geography, history and art.

In their teaching, schools were to cover a set of 'Key Stages' aimed at achieving a number of prescribed learning aims.

Where local conditions allowed, parents could specify which school they wanted their children to attend.

122 of 199

Provisions of the 1988 Education Reform Act cont.

League tables, showing the examination results achieved by schools were to be published.

123 of 199

The Poll tax 1989-1990.

Thatcher believed that the general public would continue to support her as she continued to drive for accountability in local government.

It was this thinking that led her to introduced the community charge (the poll tax), first in Scotland in 1989 and a year later in England and Wales.

The poll tax has been described as 'a reform too far'. It caused a lot of outrage among the public.

The tax was a flat-rate levy to fund local services, to be paid by all adults resident in the local area, not just owners of property.

It wasn't meant to be controversial, it was meant to be a rationalising of the existing system of raising money through rates but nearly everybody agreed that these rates were unfair.

For example a single pensioner living alone might well be charged the same rates as a household of four wage-earners living in a property of equal value.

124 of 199

The Poll tax 1989-1990 cont.

The idea originally came from the Adam Smith Institute, a Conservative 'think-tank', which suggested that since there would be 38 million poll-tax payers, compared with only 14 million ratepayers, payments for local services would be much more evenly and justly spread.

Also if everybody had to pay for local services then everybody would become much more conscious of the quality of the services provided.

Thatcher judged that the community charge would help make local authorities answerable to the public who would be the people now paying for their services.

Her hope was that local electors would embrace the poll tax and then go on to vote out high-spending Labour councils and vote in responsible Conservative ones but the opposite happened.

125 of 199

Opposition from within the party over Poll tax.

There were a number of Conservative MPs, Edward Heath and Michael Heseltine being the most prominent, who had become unhappy with Thatcher's approach.

They argued that the government should use redistributive taxation to help the disadvantaged members of society. For these 'one-nation Conservatives' the poll tax's main disadvantage was that it was a regressive tax, as a flat rate levy it bore hardest on the poor.

They believed that riots in various English cities in the 1980s held a message, because despite the fact that these disturbances had complex causes, they could be interpreted as an expression of the disaffection of many people.

Events showed that the government had misjudged the situation and that the financial merits that the poll tax brought meant little to a public who saw it as a new tax imposed by a grasping government intent on trapping everybody in the same net.

The opposition from within the party was the most disturbing for Thatcher.

126 of 199

Further opposition to the Poll tax.

Opposition to the charge was immediate and organised.

Millions of people refused or avoided payment.

The significant feature of the opposition came from across the political spectrum. The far left group, Militant Tendency, revived itself to form the All-Britain Anti-Poll Tax Federation.

The Scottish National Party (SNP) ran a successful 'can't pay, won't pay' campaign.

The Labour and Liberal Parties did not openly encourage non-payment but they did savage the government on the issue.

When the charge came into force in England in March 1990 it was around double the estimate. At this even the respectable middle classes began to protest.

The most serious disturbance came wit a violent anti-poll tax demonstration in Trafalgar Square on 31st March.

127 of 199

Opposition from within the party over Poll tax con

Thatcher had forewarning of this opposition from within her party in 1988 when several Conservative backbench rebellions took place against the Poll tax.

One of the most worrying of these rebellions was from an amendment by Michael Mates to modify the proposed tax in the interests of 'fairness'.

128 of 199

The cost of collection of Poll tax.

Owing to the resistance it aroused the poll tax cost two and a half times more to collect than the rates had.

In an effort to keep down poll tax levels the government 'charge-capped' a number of authorities, mostly Labour but some Conservative. This involved compelling them to reduce their budgets even if it meant cutting services, a result that was contrary to the original notion of improving local government services in the interests of the public.

Critics had strong grounds for asserting that the whole exercise had been aimed at imposing the will of the central government on local authorities rather than encouraging greater local democracy.

The poll tax was withdrawn in 1991 and substituted by a new council tax based on the value of a home within 8 assessment bands.

129 of 199

Thatcher and Europe.

When Thatcher came into office Britain was struggling with poor economic performance, caused partly by the difficult adjustments that had to be made on entering the EEC.

Thatcher claimed that she had not initially been anti-EEC, she in fact campaigned for the 'Yes' vote in the 1975 referendum, but that when she realised how much waste and inefficiency there was in the Brussels bureaucracy and how much Britain was disadvantaged in the EEC.

The centralising, bureaucratic nature of Europe ran counter to the revolution she was trying to bring about in Britain.

Thatcher's main concerns about the EEC were:
- Protectionism, the principle on which Europe operated, was outmoded in an age of economic globalism.
- Europe was obsessed with a dated concept of centralisation when the policy was clearly collapsing in the wider world.
- The disparity between the budget payments made by the separate member states rewarded the inefficient nations and penalised efficient and productive ones.

130 of 199

The issue of federalism in Europe.

Thatcher's response to her concerns about the EEC was to emphasise the virtues of national sovereignty and free enterprise.

Thatcher was also disturbed on a deeper level by the threat that European federalism held for Britain.

She stressed how young the European institutions were, with none of them pre-dating 1945 whereas Britain's governmental system had evolved.

She felt that Europe could easily become the prey of creeping socialism and bureaucracy because in the final analysis the EEC was not subject to genuine democratic control.

These fears had shaped the attitude of both Labour and Conservatives Parties from as early as the 1950s when the first moves towards European union were made.

Thatcher's manner was what made her appear particularly hostile towards Europe. She used her adversarial style of debate in her discussions with Europe.

131 of 199

The issue of federalism in Europe cont.

Thatcher's style of debate however was out of place in a European context as direct confrontation was rare between European ministers and officials.

They tended to get things done by compromise, concession and private agreements.

Techniques like these irritated Thatcher and she wasn't afraid to show it.

132 of 199

Britain's deeper absorption into Europe.

Despite her reluctance, it was Thatcher who presided over the process by which Britain was drawn ever closer into Europe.

In 1986 she accepted the Single European Act which marked the biggest step towards a centralised Europe that had yet been taken.

The main terms of the act were:

The signatory countries committed themselves to closer monetary and political union.

The principle of supra-nationality, the subordination of individual member states to the EU, was established.

The right of individual member states to veto majority decisions was abolished.

133 of 199

The exchange rate mechanism.

Thatcher was also in office when Britain agreed to enter the ERM in October 1990.

Thatcher had been told by her financial experts that it would provide a means of fighting inflation. In the event it did the opposite and in 1992 a monetary crisis obliged Britain to withdraw from the ERM.

Thatcher claimed later that she had been misled into entering the ERM in 1990 by her former Chancellor, Nigel Lawson, and her Foreign Secretary, Geoffrey Howe. Both ministers were to play an important role in the weakening of Thatcher's position as PM and party leader.

On 31st October 1990 Thatcher returned from a top-level European meeting in Rome where she had openly declared the Britain would never join the single currency.

134 of 199

Thatcher's legacy.

She had changed the political, economic and social agenda of British politics. Some of her policies were deeply controversial but the following governments of Major and Blair were profoundly affected by what she had done.

Subsequent governments followed the abandonment of consensus politics, the replacement of Keynesianism with the free market, reduction of the power of the state and greater opportunities for people to live their lives without government intervention, limiting the power of trade unions, local governments answering more directly to the people and the notion of social accountability.

Tony Benn observed that 'the Prime Ministers who are remembered are those who think and teach, and not many do. Mrs Thatcher influenced the thinking of a generation'.

Thatcher did not necessarily achieve all her aims with mistakes over poll tax, Britain's tax bill rising, public expenditure reaching record high levels, in practice she broadened the power of central government and she took Britain deeper into Europe.

135 of 199

Foreign affairs.

By the time Thatcher left office she was more popular abroad than she was at home.

She played a huge role in bringing about the collapse of the Soviet Union and the end of the Cold War.

136 of 199

Northern Ireland.

When Thatcher took office she was all too aware of the task facing her in Northern Ireland.

Two months before she became Prime Minister Airey Neave, the man whom she intended to make Northern Ireland Minister, was killed when a bomb was planted under the bonnet of his car exploded as he drove out of the House of Commons' car park.

The killers were the Irish National Liberation Army (INLA) who gloatingly claimed responsibility.

5 months later at the end of August Earl Mountbatten of Burma was killed by a bomb planted on board his holiday yacht, which also killed his daughter and grandson and two others. The murders were synchronised with the detonation of two remote-control bombs at Warrenpoint in Northern Ireland which killed 18 British soldiers of the parachute regiment.

The troops were targeted because the IRA considered that particular regiment to have been responsible for Blood Sunday.

137 of 199

Northern Ireland cont.

The INLA though that Thatcher would take a tough stance over Northern Ireland and they were right.

However Thatcher's approach did not exclude negotiation and cooperation where she thought they would be helpful.

In 1980 she had a number of meetings with Charles Haughey, the Irish Taoiseach, with a view to establishing a 'closer political cooperation' between Dublin and Westminster.

138 of 199

The death of Bobby Sands in 1981.

In March 1981, in protest that the authorities at the Maze prison refused to treat him as a political prisoner, Bobby Sands, a convicted bomber, went on a hunger strike.

Thatcher told the authorities to stand firm in the face of such coercive martyrdom. Eventually Bobby Sands died after 66 days without food.

Sands became an iconic figure to the Catholic population following this. There was intense anger towards the British government that his suicide aroused.

However Sinn Fein the legitimate republican party began to pick up votes in elections. Although Sinn Fein was the political wing of the IRA, the growing willingness of nationalist and republicans to use the ballot box was at least a sign that violence was not looked on as the only recourse.

But a stable political situation was still a long way off. This was illustrated on 12th October 1984 when Thatcher narrowly avoided being assassinated in the IRA bombing of the Grand Hotel in Brighton where the Conservative conference was being held.

139 of 199

The death of Bobby Sands in 1981 cont.

The bomb had been concealed in a bathroom wall three weeks before and was timed to go off in the early hours of the morning when most of the Cabinet were expected to be there.

5 people were killed, none of them ministers, and 30 others injured.

Thatcher gave an impressive performance later that day, insisting that the conference must go on and declaring that democracy would never bow to terrorism.

140 of 199

The Anglo-Irish Agreement.

Reached in August 1985, signed by Thatcher and the Irish Premier, Garrett Fitzgerald and it marked a major step towards democracy.

Its three main provisions were:

- The Irish Republic recognised Northern Ireland as being constitutionally a part of the UK.
- The British government gave an assurance that it supported full civil rights for all in Northern Ireland and acknowledged the strength of nationalist desires for a united Ireland.
- The two governments committed themselves to close cooperation over cross-border security matters.

In hindsight the Agreement can be seen as an important stage in the advance towards a peaceful settlement. However at the time the Agreement was bitterly condemned by many of those who it closely concerned.

Thatcher had intended for it to be a basis for reconciliation in Ulster and was shocked by the vehemence of the response.

141 of 199

The Anglo-Irish Agreement cont.

Unionists objected to the involvement of the Irish government in Northern Ireland's affairs because they feared it gave encouragement to the notion of a united Ireland under the rule of Dublin.

The Unionist MPs showed their bitterness by resolving not to attend Westminster, copying a tactic that Sinn Fein had used continually.

The republican rejected the Agreement for a similar but opposite reason. Its terms confirmed the very thing they were fighting against, Northern Ireland's continuation as a part of the UK. They pledged themselves to continue 'the armed struggle'.

Some members of Thatcher's government were unhappy with the Agreement on the grounds that it might be wrongly interpreted as a concession towards the men of violence in Northern Ireland.

Ian Gow, the Housing Minister, resigned though he continued to be on good terms with Thatcher. In 1990 he was killed outside his home in Sussex by an IRA car bomb.

142 of 199

Massacre at Enniskillen in 1987.

The IRA's commitment to 'armed struggle' was expressed in November 1987 when they exploded a bomb at a Remembrance Day service in Enniskillen in Northern Ireland.

11 people were killed and 60 others, including women and children, were maimed.

The fate of these innocent victims was so poignantly tragic that many people in both the Catholic and Protestant communities doubted that any cause could ever justify such suffering.

The IRA stated that the carnage would not deter it from its mission. Its official comment was 'the British Army did not leave Ireland after Bloody Sunday'.

143 of 199

Death on the Rock in 1988.

In March 1988, in the British colony of Gibraltar, the Special Air Service, the crack anti-terrorist unit of the British armed services, shot and killed three IRA agents before they had time to detonate a car bomb intended to decimate British troops at a changing of the guard ceremony.

There was little public sympathy for the victims, though there was official disquiet when eyewitness accounts suggested that they had been shot without warning.

At the funeral a week later in Belfast, a crowd of some 5000 attenders were fired on by Michael Stone, a deranged, loyalist gunman. Three died and another 50 were injured.

Three days later two off-duty British soldiers inadvertently drove into an area where an IRA parade was being held. They were dragged from their car by the crowd and beaten. Later they were shot and killed by IRA men.

In October in an effort to deny the terrorists 'the oxygen of publicity' Thatcher's government imposed a broadcasting ban on the IRA. This involved blanking out the voices of terrorists and their supporters and substituting actors' voices.

144 of 199

Death on the Rock in 1988 cont.

The catalogue of death made bitter reading but behind the violence that obviously caught the headlines there were still efforts being made to bring stability to Ulster.

In 1987 the government introduced the Central Community Relations Unit which was established to foster greater contact and understanding between Catholics and Protestant.

In 1989 the Fair Employment Act was introduced which required employers who had more than 25 workers on their books not to discriminate when allocating jobs and opportunities for promotion.

In 1990 the Northern Ireland Community Relations Council was created to extend the support and resources granted to the Community Relations Unit three years earlier.

They were perhaps small advances but they kept alive the idea that the government was not totally consumed with the fight against terrorism.

145 of 199

Thatcher and Reagan

Thatcher's powerfully expressed anti-Communism views partnered well with the prevailing view in the United States.

Thatcher and Reagan were leadership soul mates. Reagan had been greatly impressed with Thatcher's handling of the Falklands War. Their shared attitudes personalised the special relationship between Britain and the USA.

They did disagree over some aspects of foreign policy but they were of the same mind over the Cold War's big questions.

They agreed that the West was fighting against the forces of evil and had to remain fully armed with nuclear weapons.

As a result Britain bought Trident missiles to replace the obsolete Polaris variety from the USA at an initial cost of £10 billion.

In 1981 Britain also allowed the USA to install its Cruise missiles at the US airforce base at Greenham Common.

146 of 199

Thatcher and Reagan cont.

The Left in both countries accused Reagan and Thatcher of over-simplifying the issues.

The effect of the Anglo-American unyielding front towards the Communism in the 1980s put great pressure on the Soviet Union, whose attempt to keep up in the arms race with the West exhausted it militarily and financially.

This proved to be a major factor in the USSR's eventual disintegration in 1991.

The special relationship that Thatcher had helped to renew was to prove a significant factor in the subsequent administrations of Major and Blair.

147 of 199

The fall of Thatcher.

The government lost all four by-elections held in 1989 and 1990.

In April 1990 opinion polls showed that Labour had gained a 20-point lead over the Conservatives and the polls also showed that Thatcher's personal popularity rating was lower than at any other time in her 11 years as Prime Minister.

These developments led a growing number in her party to question whether they could win the next general election with her as leader. This feeling was intensified by the disagreements in the Cabinet over the economy and Europe.

It was in this atmosphere that Michael Heseltine decided in November to mount an open challenge for the leadership. Thatcher had easily survived a challenge in 1989 when backbencher Sir Anthony Meyer stood against her.

However in that instance 33 MPs voted against her and 25 others abstained which suggested to some, including Heseltine, that her popularity was beginning to fade and that he might be able to unseat her.

148 of 199

The leadership contest November 1990.

In the ensuing contest Thatcher won the first ballot by 52 votes but she regarded the narrowness of the margin as evidence that she had lost the confidence of two out of five of the Conservative MPs.

She took an individual sounding of her Cabinet colleagues, and with a few exceptions they all told her that her time was up.

So Thatcher withdrew from the second ballot and announced that she would resign as soon as her successor was chosen.

By the time the second ballot was helf John Major and Douglas Hurd had entered the race. This ended Heseltine's chances as he found that the majority of the parliamentary party did not really want him.

Major won 185 votes, Heseltine won 131 and Hurd won 56.

149 of 199

The Gulf War in 1991.

Hid conduct over the crisis over Kuwait was statesmanlike when he cooperated effectively with the United States in creating a coalition invasion force.

In 1991 this force, in keeping with UN resolutions, successfully ended the illegal occupation of Kuwait by the forces of Iraq's leader, Saddam Hussein.

Major's decision to keep the opposition leaders, Neil Kinnock and Paddy Ashdown, informed on the key moves in the Gulf War won him considerable respect.

At home, knowing that there was going to be an election soon, Major made little attempt to modify the Thatcherite policies he had inherited. He did quietly withdraw the unpopular poll tax in 1991 and also announced that his government would base its approach on a new 'Citizen's Charter'.

150 of 199

The Maastricht Treaty 1992.

One issue which Major did adopt a different approach to Thatcher was over Europe. Major wished to show that he was a good European.

He took the momentous step of signing Britain up to the Maastricht Treaty in February 1991, whose declared aim was 'to create an ever-closer union among the peoples of Europe'.

The main terms of the Maastricht Treaty were:

- Full European integration.
- A common European foreign policy.
- A common European defence policy.
- A European Central Bank.
- A single European currency, the euro to be adopted by 1999. Britain obtained the opt-out clause, which it exercised in 1999.
- The Treaty to come into effect in November 1993.
- The European Community would become the European Union (EU).

151 of 199

The 1992 election.

Until the week before the election day, on 8th April 1992, it was generally assumed that after 13 years in power the government would lose.

However the Labour Party conducted by Neil Kinnock led a poorly judged campaign with Kinnock trying to run it with the razzmatazz style of American politics that came off as tasteless.

Labour also caused problems for themselves when presenting the shadow budget which seemed to suggest large increase in taxation. Major exploited this and The Sun was convinced enough to switch its support to Conservative.

The Consevatives won 336 seats and 42.0% of the vote.

Labour won 271 seats and 34.2% of the vote.

The Liberal Democrats won 20 seats and 17.9% of the vote.

152 of 199

Crises over Europe.

In the late summer of 1992 a crisis developed over the ERM. The ERM had been devised as a system for reducing inflation. This was to be done by creating parity between the various European currencies by ******* them to the value of the Deutschmark, Europe's strongest currency, rather than let them find their market value.

When Britain joined the ERM in 1990 the exchange value of the pound sterling had been DM2.95 but this was unrealistically high and caused British exports to become over-priced.

In September 1992 international bankers sensing that the sterling was overvalued began to speculate against it on the money markets. The pound began to fall alarmingly.

In a desperate attempt to maintain the pound at the level required by the ERM, the government resorted to desperate measures. These included Norman Lamont, the Chancellor, raising interest levels from 10 to 15% and selling of £30 billion's worth of Britain's foreign reserves to shore up sterling, but the pressure on the pound was too great.

153 of 199

Crises over Europe cont.

Major's government did the only thing it could, and on the 16th September after 'Black Wednesday' it withdrew from the ERM.

The consequences of this withdrawal were:

- Britain's case for becoming involved in European monetary union was weakened.
- The argument of the Eurosceptics against deeper integration with Europe was strengthened.
- The Conservatives' reputation for financial expertise was gravely damaged.
- Labour gained a 15-point lead in the opinion polls.
- Major's authority as Prime Minister was undermined.
- A deepening of the Cabinet split between Eurosceptics, primarily Peter Lilley, Michael Portillo and Michael Howard, and the pro-Europeans, primarily Kenneth Clarke, Michael Heseltine and Douglas Hurd.

The longer term economic effects however proved far less disastrous. By 1996 the exchange rate of the pound was DM3.00, a higher rate than when the pound was in the ERM.

154 of 199

Crises over Europe cont.

Britain's growth rate outperformed that of its European partners. It prompted the Eurosceptics to inquire yet again what precisely Britain was supposed to get from being in the European Community.

However these longer terms effects were of no immediate benefit to Major's government. Black Wednesday left its mark on the remainder of his administration up until 1997.

The main legacies of the ERM crisis were a divided Cabinet, greater uncertainty about Europe, a public who now doubted the government's economic financial competence/

155 of 199

The struggle over the Maastricht Treaty in 1993.

To become binding the treaty had to be ratified by Parliament. The ERM fiasco had made this problematic.

Many in Major's own party and a significant number of Labour MPs were so concerned over the loss of sovereignty entailed by the Masstricht Treaty that they voted against the ratifying bills when they were introduced.

The climax came in July 1993 when organised resistance by the Eurorebels, a large group of Conservative MPs openly led by Bill Cash and supported by most of the party's Eurosceptics who fought against the ratification of the treaty, defeated a key Bill necessary for the treaty to come into effect in November 1993.

Having committed his government to Maastricht Major was not prepared to accept the verdict of the Commons. He reintroduced the proposal to accept the Maastricht Treaty and made it part of a formal vote of confidence in the government.

In this way the proposal was forced through, since the Eurorebels would have brought down the government if they voted against it. But the desperate means gave strength to the growing number of Eurosceptics.

156 of 199

The struggle over the Maastricht Treaty in 1993 co

Eurosceptics claimed that Britain was being railroaded into European integration and they asserted that Europe and its supporters seemed frightened of democracy.

Calls for a national referendum were rejected by the government on the grounds that a referendum was 'unconstitutional'. The real reason was that the government knew it would lose a reference, with opinion polls indicating that the majority of the population were on the Eurosceptic side.

Having been tricked into voting 'yes' in the 1975 referendum the British people were unlikely to be fooled again. Major's later success in 1992 in obtaining the European Community's agreement to the principle of subsidiarity had done little to lessen Eurosceptic fears.

Although the Labour Party officially accepted Maastricht there was no doubt it derived great satisfaction from the government's embarrassments. But Major was more offended by the opposition from within his own party. A Prime Minister who does not have the full support of his Cabinet and party is in a difficult position and this was the case for Major.

157 of 199

The struggle over the Maastricht Treaty in 1993 co

In July 1995 in an effort to end the backstabbing to which he felt he was continually subjected Major called a leadership election.

He easily won it, defeating John Redwood by 218 to 89.

But small though the vote against Major was, if 22 abstentions were added in, it showed that over 100 members were not fully committed to him as leader.

158 of 199

Bosnia.

In the early 1990s a bitter and complex civil war was fought in the troubled Balkans where the break-up of the former federal state of Yugoslavia and this left a set of fiercely competing national, religious and ethnic groups.

Fighting had become so vicious in Bosnia between 1992 and 1995 that the international powers became involved in order to prevent the genocide of the largely Muslim Bosnians by the largely Christina Serb forces under Ratko Mladic.

Douglas Hurd, the Foreign Secretary, had irritated the Americans by opposing European or US intervention. Much to the annoyance of Clinton's administration, Hurd and other European ministers had previously declined to support the idea of NATO involvement on the grounds that outside interference would simply prolong the struggle.

European reluctance was eventually overcome and Britain contributed to a massive series of NATO aerial attacks on Serbian forces in August and September 1995. 'Operation Deliberate Force' brought the Serbs to the negotiating table.

In December 1995 the Dayton peace agreement was signed.

159 of 199

Bosnia cont.

In the Dayton peace agreement the warring parties agreed to keep to certain designated areas, which were to be monitored by the UN and NATO forces.

Major had the satisfaction of being one of the signatories when the Dayton agreement was ratified in Paris in December by the major powers: the USA, Britain, France, Russia and Germany.

A later development alleged that Hurd's slowness to move against Serbia had been because of his commercial links with that country which diminished Major's satisfaction.

The charge was largely based on the revelation that Hurd had subsequently gone to Serbia to meet Slobodan Milosovic, the Serbian leader. In fact Hurd was representing the NatWest bank, a position he had taken up when he was no longer Foreign Secretary.

There was even a Bosnian accusation that Hurd had been complicit in the genocide. This may have been absurd but the overall impression given to observers was that the government had not come out well of the matter.

160 of 199

Northern Ireland.

Major had only been in office for two months when the IRA lobbed mortar shells at 10 Downing Street from a parked van. This was a prelude to a sustained IRA bombing campaign in Britain.

In March 1993 a boy of three and one of 12 years old were killed and 50 people were injured by bombs left in litter bins in a shopping mall in Warrington, Cheshire.

In April, one person was killed and 40 were injured by a bomb p;anted in a lorry in Bishopgate in the City of London. The bomb also caused over a billion pounds worth of damage to a number of bank premises, including the NatWest tower.

The anger among ordinary people at these brutalities led to large peace rallies in London, Belfast and Dublin.

Aware of how public opinion war turning against them the IRA put out disclaimers saying that the deaths had not been intended and that it was the fault of the British police who had failed to act on the detailed warnings that the IRA had given them about the location of the bombs.

161 of 199

The Downing Street Declaration.

In December 1993 Albert Reynolds and John Major put together the Downing Street Declaration.

The chief features were:

The British government announced that it had 'no selfish, strategic interest in Northern Ireland', its sole concern was to accede to the democratically expressed wishes of the people there.

It also accepted that it was 'for the people of the island of Ireland along, north and south, to bring about a united Ireland, if that was their wish'.

Reynolds declared that the Irish Republic accepted the right of the majority in Northern Ireland to decide its future and that, if a democratic settlement could be achieved there, the south was prepared to drop its traditional claim that Northern Ireland was part of the Republic.

162 of 199

The ceasefire in 1994.

Unofficial contacts between the British government and Sinn Fein eventually convinced the IRA that the Declaration had indeed recognised the key republican and nationalist positions on the status of Northern Ireland and that Britain was not committed to indefinite control of the province.

This was sufficient for the IRA to declare a ceasefire in August 1994.

There was a question of whether the loyalist paramilitary units could be persuaded to do the same and everyone knew the IRA would not keep the ceasefire if it was one sided.

Major took the step of assuring them that the British government had no intention of forcing the North into a united Ireland and this proved sufficient for the time being to quell Unionist fears.

In October the loyalist units announced that they would be observing their own ceasefire. For the first time since 1969 Northern Ireland was at peace.

163 of 199

The Mitchell Report in January 1996.

The ceasefire did not hold, between 1996 and 1998 there were frequent outbursts of renewed violence. The basic fact was that the two sets of paramilitaries did not trust each other.

A more encouraging development was the involvement of the USA in the matter. In 1995 President Clinton made rapturously received visits to both Dublin and Belfast and in 1996 Senator George Mitchell chaired an international commission set up to consider the Irish issue.Major didn't see the American move as outside interference in a British problem, but rather welcomed the commission as offering a way forward.

Mitchell laid down a set of principles on which a peace process might be developed with the major ones being:
- The total disarmament of all paramilitary organisations and their renunciation of force.
- The agreement by all parties concerned to accept as binding any agreement reached in an all-party negotiation.
- His central conclusion was that a real progress towards a settlement was impossible without decommissioning.

164 of 199

Sleaze.

By the 1997 general election Major's position had been gravely weakened by a press campaign determined to expose leading Conservatives as being guilty of sexual scandal corruption.

In 1992 the Heritage Minister, David Mellor, resigned over an affair with a Spanish actress which according toThe People newspaper, involved his wearing the Chelsea football team's trip when making love.

In 1994 the Environment Minister, Tim Yeo, resigned after it was revealed that an affair he had had with a Conservative local councillor had produced a love child.

In 1994 Stephen Milligan, a promising young Conservative MP, accidently throttled himself to death while engaging in an act of sexual self-strangulation.

In 1994 theGuardian accused Neil Hamilton, a Corporate Affairs Minister, of having received brown envelopes stuffed with money from Mohamed Al Fayed, the billionaire owner of Harrod's store, who hoped to gain special commercial favours in return. Hamilton denied the allegations and a series of libel actions followed.

165 of 199

Sleaze cont.

In the 1997 election, Martin Bell, a BBC correspondent, stood as an independent against Hamilton in Tatton constituency with the calculated aim of highlighting the lack of probity in government circles. The Labour and Liberal Democrat parties agreed not to field a candidate which resulted in Bell's winning by a majority of 11,00. The media attention given to the campaign was a great embarrassment to Major's government.

The mixture of these scandals spread a shadow over Major's years in office and contributed significantly to his losing all the by-elections held during his time. The lowest point was reached in the general election of 1997 when his party suffered the heaviest defeat that any government had undergone in the 20th century.

166 of 199

1997 election.

The following are some reasons for the Conservatives' defeat:- The continuous divisions within the Cabinet and the Conservative Party between Eurosceptics and pro-Europeans.- The government's enforced withdrawal from the ERM undermined the Conservatives' reputation for the responsible financial management.- The public's distaste for the unseemly squabbles over the undemocratic ratification of the Maastricht Treaty in 1992.- Major's uninspiring leadership, given that he was never able to win the total loyalty of his colleagues and party.- The Conservatives had already lost all the by-elections held since 1990.- Throughout the 1990-19977 period the government had a very small majority, which had the inhibiting effect of making it do deals with the minority parties such as the Ulster Unionists.- The cumulative destructive effect of a long series of sexual and financial scandals involving government ministers and Conservative MPs.- The recovery in strength and confidence of the new Labour Party under Tony Blair who presented a far more youthful and lively image than Major.- The Conservatives had outstayed their time after 18 years in government.

167 of 199

1997 election cont.

The results showed how the imbalance in the electoral system now heavily favoured the Labour Party.

Despite its overwhelming number of seats, Labour was still a minority government.

For each seat Labour won, it had polled 32,340 votes.

For each seat the Conservative Party won, it had polled 58,187 votes.

For each seat the Liberal Democrats won, it had polled 113,977 votes.

Labour won 418 seats and 44.4% of the vote.

The Conservative won 165 seats and 31.4% of the vote.

The Liberal Democrats won 46 seats and 17.2% of the vote.

168 of 199

Tony Blair's government.

Labour Prime Minister.

Was in power from 1997 to 2007.

169 of 199

Tony Blair was New Labour leader.

Despite its defeat in the 1992 general election there were clear signs that the Labour Party's move away from the left which had begun under Neil Kinnock, leader from 1983-1992, and John Smith, leader from 1992-1994, had begun to find favour with the electorate. Blair extended the process by which the party distanced itself from the dated policies that had deterred rather than encouraged support from the general public.

As leader of the opposition for the last three years of Major's government he skilfully and wittily plated upon the tired character of the Conservatives, who had been too long in government and who had become associated with corruption and scandal.

Blair complemented his attack on the government with the development of his programme for New Labour with the main features being:
- Abandonment of Nationalisation.
- Avoid the use of the term 'socialist' so as not to scare the electorate.
- Promise the capitalism would be safe in Labour's hands.
- Maintain legal restrictions on trade unions.
- New Labour would no longer present its policies in terms of class struggle.

170 of 199

Tony Blair as New Labour leader cont.

The policies of New Labour were primarily intended to appeal to middle-class Britain where the bulk of the electorate was to be found. By avoiding extremes and adopting progressive ideas New Labour hoped to win over uncertain Conservative and floating voters.

It was a recognition that the old working class, which had historically been the main support of Labour, had greatly shrunk with the decline of large-scale industry in Britain. It was also an implicit acceptance that Thatcherism had made changes that could not be undone.

This new line of approach upset the socialist left of the part as they characterised it as a sell-out by the Labour Party to the forces of expediency. They were concerned that New Labour lacked a distinct, radical ideology but that instead it presented itself as wanting to do the same things as the Conservatives only more efficiently.

The response of the supporters was to point out that loyalty to old Labour values and refusal to modify policy had simply made the party unelectable for 18 years.

171 of 199

Blair's style of government.

Blair's style of government was well illustrated by his use of spin doctors. Blair relied on a team of advisers, with the most prominent being Alistair Campbell and Peter Mandelson to handle the media and help him judge the public mood so that he could adjust his approach accordingly.

Thatcher had also employed a well-organised press team, led by Bernard Ingham. What was different about Labour's spin doctors was the large degree of influence they appeared to have over the shaping and presentation of government policy.

Blair's spin doctors provided him with 'buzz words' and sound bites that Blair and the party used to convey New Labour's approach including:
- 'cool Britannia' to describe how fashionable and in touch New Labour was as a movement.
- 'inclusiveness' referred to a society where nobody was left out, where there would be no social exclusion.
- 'stakeholder society' meant ordinary people having state-protected investments and pensions and people feeling they belonged collectively to society.
- 'forces of conservatism' a blanket term used to condemn everything that held back Blair's idea of progress.

172 of 199

New Labour's economic policies.

New Labour's first four years went well. The economy appeared healthy and Brown proved a major success as Chancellor.

One of his first moves was to give the Bank of England the authority to set interest rates independently of government interference. This appeared to take an important financial issue out of the political arena though those of a more suspicious mind wondered whether it was not a subtle way of avoiding blame should mistakes later be made in the fixing of the rates.

Brown also kept to the pledge given before taking office in 1997, that Labour would keep within the spending plans the Conservatives had laid down. His prudent budgets swelled Britain's reserve funds while at the same time keeping inflation down.

There is an argument that he could not have done this had he not inherited a strong economy that Major had built up. Major's government had gained a poor economic reputation but it was not entirely justified. One Britain had withdrawn from the ERM its financial and economic situation improved.

173 of 199

Constitutional issues.

In its election manifesto Labour had made a commitment to devolution which it honoured by the creation of Scottish Parliament and Welsh Assembly. Devolution was deliberately intended to fall short of full independence which was something no Labour government could contemplate.

All figures showed that historically Scotland and Wales voted Labour while England voted Conservative and if Scotland and Wales ever gained full independence it would destroy Labour's chances of holding power.

The reform of the House of Lords raised further problems for the government. Ending the right of unelected hereditary peers to sit in the upper house was intended to strike a blow for democracy but the problem was what form the new chamber would take and what powers it would have.

By 2001 Blair had created more life peers in 4 years than the Conservatives had in 18 years. Critics complained that it was part of his scheme for consolidating New Labour's authority by packing the House of Lords with his own appointees so that it would cease to be obstructive.

174 of 199

The continuity between Thatcherism and New Labour.

Blair's government was very different in style and tone from the Thatcher-Major Conservatism that it had replaced but it made no substantial effort to undo what had been done in the previous 18 years.

Thatcher's legacy was a powerful one. She had weakened the trade unions, reintroduced the principle of accountability into the public services and made the nation acknowledge that in economic matters nothing was for nothing.

The effectiveness of what she had done, though she was attacked for it in her time, convinced those who came after her to follow much the same path.

175 of 199

Problems abroad.

Blair made a strong impression abroad. EU ministers and officials had warmed to him in personal meetings and the Clinton administration in the USA was impressed with him. Clinton had a personal reason to be grateful to Blair for offering his moral support in 1999 when impeachment proceedings were instituted against the President.

At the close of the century the new government faced wwo particularly difficult problems in foreign affairs, the continuing war in former Yugoslavia when the Dayton agreement had broken down and Iraq.

Soon after he became Foreign Secretary in Blair's government, Robin Cook declared that New Labour would pursue an 'ethical foreign policy'.

176 of 199

NATO and Serbia.

Blair took an important initiative in the complex struggle that had broken out in former Yugoslavia. In 1999 he persuaded NATO and the USA to intervene militarily by relaunching air strikes against the Serbian forces under Slobodan Milosevic.

Blair's justification was that the Serbs had been engaging in the genocide of the Albanian people of Kosovo, but there were critics who argued that the NATO action had led the Serbs to intensify their mistreatment of the Kosovans.

There were also arguments raised against the manner in which NATO bombing raids, carried out principally by the USAAF and the RAF, had been conducted.

To minimise the chance of casualties amongst themselves the bomber crews had flown above 15,000 feet, this meant that the bombs might well strike wrongly identified non-military targets. The Serbs produced evidence to show that this had happened.

Initially Blair had wanted to send in ground troops. In a speech in Chicago in 1999 he spoke of this as an act of necessary humanitarian intervention, but Clinton was not prepared to go that far. Eventually Milosevic did withdraw his troops.

177 of 199

Iraq.

The accusation of indiscriminate bombing was also at the centre of the dispute in another area, Iraq.

In 1998 as part of a programme to make Saddam Hussein, the Iraqi leader, comply with UN resolutions requiring him to open up his country to weapons inspection, Blair's government again joined with the USA in imposing sanctions.

Observers reported that the effect of sanctions was not to hurt the Saddam regime but to deprive ordinary Iraqis of vital supplies such as medicines.

It was also charged that the frequent nightly bombing raids that the allies carried out against military installations had in fact caused the death of many innocent civilians.

Iraq was to become the single biggest problem for Blair in all his 10 years in office.

178 of 199

New Labour and Europe.

Until the 1970s the Labour Party had been far from pro-European and it was not until 1983 that if officially dropped its commitment to withdraw Britain from the European Community.

As part of its reformation as New Labour the party began to warm towards Europe. In part this was opportunistic. Labour was swift to exploit Thatcher's ambiguous European attitude and it made the moist of Major's embarrassments over Maastricht and the ERM.

The party's earlier fears that Europe was essentially a club for capitalists had diminished. Labour could see the gains that workers could now derive from the generous European employment laws contained in the 'Social Chapter' which was part of the Maastricht Treaty which committed EU member states to introduced extensive welfare schemes.

The party declared its commitment to the European ideal. Blair strove to impress the other European leaders with his sincerity.

179 of 199

New Labour and Europe cont.

The question that confronted Blair and his government at the beginning of the century was how far they should lead Britain down the path of European integration.

The critical test would be whether the government would abandon the pound sterling and enter fully into the singly currency system, a step which all the other EU members, apart from Denmark, had taken by 1999.

Labour's interim answer was that it would prepare the ground for entry but would make a final commitment only if and when it could be established that entry was in Britain's economic interests. Its decision would then be put to a referendum of the people.

Brown was far from being a Eurosceptic but he was more cautious than Blair in this approach to further British integration. Left to himself Blair might well have been willing to accept the euro at this stage. it was the Chancellor who insisted that five economic tests had to be met before that could happen.

180 of 199

Income and expenditure.

During Blair's first period in office from 1997 to 2001 the economy appeared to flourish and his government reaped the benefit politically with another sweeping election victory in 2001.

Brown gained an enviable reputation for restricting inflation and building up Britain's financial reserves. But the ground was already prepared when he took over as Chancellor.

When the Conservatives went out of office in 1997, the inflation rate was 2.6%. Ten years later when Brown became Prime Minister it was 4.8%. The basic explanation for the rise was that after three years of tightly controlled spending, Brown relaxed his prudent approach and engaged in large-scale government expenditure.

Large amounts of money were pumped into the public sector, particularly into the NHS. There was an obvious argument for this on social grounds, but the financial effect was increasing inflation.

181 of 199

Pensions.

In order to build up the reserves of money which he later spent, the Chancellor began what in effect was a sustained raid on people's pension provisions.

He did this by taxing the dividend payments which companies made to their investors. Since the purpose of having a pension is for holders to see a return in the form of interest on the money they pay in premiums, the taxing of dividends meant that the value of pensions rapidly fell. By 2007 the amount lost was over £8 billion.

The British pensions industry which had been one of the world's best funded and highest paying financial concerns was sunk in despondency by 2007. Individuals and companies no longer looked on pensions as a worthwhile form of investment.

One statistic which illustrates this is that the savings ratio, the annual % of an individual's disposable income that is saved rather than spent, stood at 9.7% in 1997 and declined to 3.7% by 2007.

182 of 199

Pensions cont.

An additional effect of the pensions raid was that since share prices are dependent on dividend values, the cutting of dividend payments meant that total UK share values were some £120 billion lower than they would have been without government interference.

The raid on the pension funds was an example of what has been called 'stealth tax'. In the elections of 1997 and 2001 the Labour Party had promised a low taxation policy.

In order to keep this promise financial adjustments had to be made, which while they were not technically classed as taxation, were so in practice.

Among these were:
- raising National Insurance contributions
- removing the marriage tax allowance for couples under the age of 65 years
- removing the tax relief on mortgage payments
- reducing the level of tax-free savings that could be made each year under schemes such as Tax-Exempt Special Savings Accounts (TESSAs), Personal Equity Plans (PEPs) and Individual Savings Accounts (ISAs).

183 of 199

Employment.

One of the government's proudest claims was that the number of people in employment in Britain grew during the Blair years. By 2007 there were 29.1 million people in work which was 2.5 million more than in 1997.

However while there had been growth in jobs this had not been in the areas where it was most needed, among the unskilled and the young. In 2007 there were 5.4 million people of working age, many of them between the ages of 16 and 30, who had never had a job and lived on unemployment benefit.

Another consideration that rather diminished Labour's achievement was the 37% of the increase in jobs were in the public sector which by 2007 was employing seven million people, an increase of some 900,00 during Blair's 10 years in power.

Britain had become a client state, a society in which a significant number of the population work directly for the government or its agencies, with a quarter of the workforce being employed in the public sector.

184 of 199

Employment cont.

This creation of a client state could be faulted for a number of reasons:

- It undermined democracy since public workers were hardly likely to vote against a government on whom their jobs depended.
- It was economically unsound since it undermined incentive because public sector workers have guaranteeing wages and pensions that came from state funds which were unlikely to make efficiency and productivity their main goals.
- Many of the positions in the public sector were in fact non-jobs in the sense that they had no productive value. This resurrected the situation which both Callaghan and Thatcher had tried to end. Callaghan in 1978 had told the Labour Party conference 'we are paying ourselves with money we have not earned'.

The particular charge against New Labour was that its eagerness to create an ever-expanding public sector derived from its antipathy towards small businesses and the self-employed. The workers in these independent areas were not as easy to manipulate and control.

185 of 199

Borrowing.

The government's justification for expanding the public sector was that it was a way of improving public services. However the costs incurred tended to outrun the revenue received.

The increase in government expenditure on the public sector, in areas such as the NHS, welfare services and education, could not be met entirely from taxation revenue.

Over the period of Brown's Chancellorship £100 million had to be borrowed from foreign bankers. The reason why this did not hit the headlines was that the 10 years after New Labour came to power in 1997 were a period of relative stability and growth in the international economy.

However by the end of 2007 this period was coming to an end and there was a likelihood of a serious world economic recession. In a period of decline a country that has borrowed heavily has real problems, since its growth and revenues fall at the very time it needs them to rise so that it can pay off its debts.

The decade after 1997 was in many ways a boom time in Britain.

186 of 199

'Golden Brown'.

One of Brown's highly significant actions, which went largely unnoticed at the time, was his decision to sell off gold.

Between 1999 and 2002 when the price of gold fell on the international markets, the government sold off 13 million ounces, which amounted to nearly half of its gold reserves.

In the same period the Republic of China brought up nearly seven million ounces. With the subsequent recovery of gold prices by 2005 Britain found it had lost some £3 billion, equivalent to a penny on the basic tax rate. China in contrast had doubled its money.

China also proved far sharper at using the World Trade Organisation system to its advantage than Britain.

In 2006 the British government became aware of the face that China was selling much more to Britain than it was buying and that Britain's European competitors had taken advantage.

187 of 199

'Golden Brown' cont.

In 2005 Britain's exports to China were worth only £5 billion compared to Germany's £31 billion.

In an effort to redress the balance, Britain embarked on a major campaign to increase its influence and trade with China.

The effect of this eagerness to develop commercial contact was that the government took care not to be too critical of China on other issues, such as abuse of human rights. It did not wish to risk losing trade with China's vast market of 1.4 billion people.

188 of 199

The 2001 election cont.

Labour won 413 seats and 40.7% of the vote.

The Conservatives won 166 seats and 31.7% of the vote.

The Liberal Democrats won 52 seats and 18.3% of the vote.

189 of 199

The 2005 election.

In 2005 Blair achieved a remarkable first for a Labour Prime Minister, winning his third straight election victory in a row.

The number of seats achieved by Labour was 57 fewer than the 2001 figure and its aggregate vote fell by more than 5%.

The Conservatives gained 32 more seats than four year earlier while the Liberal Democrats did better in proportional terms than either of the two main parties. However their aggregate of nearly 6 million votes, nearing two-thirds of Labour's total but it was not reflected in the number of seats they acquired.

Blair's involvement in the Iraq war lost him some popularity but he was still regarded by the electorate as the outstanding choice among party leaders. Since the Conservatives had supported the government's decision to go into Iraq they were unable to gain from the mounting criticism of the war.

Knowledge of the economic and financial difficulties that were starting to surface had not become sufficiently widespread for it to count as a factor against the government.

190 of 199

The 2005 election cont.

The Conservative Party had had three different leaders within two years. Hague had been replaced with Iain Duncan Smith after the 2001 election and then in 2003 Duncan Smith was replaced by Michael Howard.

By 2005 Blair was an experienced political operator backed by a team of spin doctors.

Howard made a bad choice of issues on which to fight the election. He chose to focus on immigration and law and order but his record of dealing with them as Major's Home Secretary had not been good.

Labour won 356 seats and 35.3% of the vote.

The Conservatives won 198 seats and 32.3% of the vote.

The Liberal Democrats won 62 seats and 22.1% of the vote.

191 of 199

Blair and Europe.

On becoming Prime Minister he immediately instructed British officials to withdraw the objections that the Major government had raised with Europe on a number of unresolved issues.

These related to the extension of European authority over the environment, regional policies, criminal justice and the Social Chapter.

Blair's chief aim in withdrawing Britain's original objections was to show the goodwill of the new government towards Europe. Some commentators have suggested that even at this early stage Blair had dreams of eventually becoming president of the EU and so wished to impress European colleagues with his dedication to the European ideal.

Within two years Blair had attended a series of EU summit meetings at which he made a number of major concessions. At Amsterdam in 1997 Britain abandoned its opt-out on EU employment and social policy. At St Malo in 1998 Britain withdrew its objection to a common European defence policy which would operate independently of NATO. The French were delighted because it had long been a French aim to have a European force separate from the USA.

192 of 199

Blair and Europe cont.

To appease those in Britain who thought he had gone too far, too soon Blair tried to perform a balancing act in 2000.

In a speech in Warsaw he said that attitudes towards Europe could be divided into two main types. On one side there were those still totally committed to the nation state and the free market, who wanted the EU to have the minimum of power.On the other side there were those who wanted the EU to supersede the nation state and have maximum powers of control.

Blair argued for a third way. He spoke of an EU made up of friendly states, retaining their individual sovereignty but collaborating on matters of common economic and political interest.

The third way notion was intended mainly for home consumption. It made little impression on EU ministers and officials who felt no compulsion to make concessions to Britain simply because Britain had made concessions to them. For them there was no room for a third way within the EU.

As an organisation it was intent on greater integration and federation.

193 of 199

Blair and Europe cont.

The EU was simply waiting for Britain to catch up and start conforming to the rules already drawn up.

Blair was made aware of this when he tried to push for a reform of the notorious Common Agricultural Policy (CAP). As a quid pro quo he spoke of his willingness to accept majority voting and drop the veto principle.

Anticipating that he would do this, the French and German governments had previously got together to block an attempts to alter CAP whose purpose from the beginning had been to protect French agriculture and was not negotiable. For France, CAP was the purpose of the EU.

194 of 199

The euro.

The merits and disadvantages of Britain's membership of the EU again became a matter for public debate in 2002 over the issue of whether the UK should give up the pound sterling and join the euro.

On New Year's Day 2002 the euro became the common currency of all but three members, Denmark, Sweden and the UK. Whether and when Britain should join were questions that divided Blair from Brown.

Blair was less concerned with the financial aspects of the case and more with the political implications. He calculated that to join the euro zone would help put the UK at the heart of Europe and enhance his own standing as a European statesman.

Brown's approach towards joining was more guarded and practical. He defined the problem in the form of a question: would joining the euro serve the long-term national economic interest?

Brown laid down five economic tests that the euro would have to pass before it could be adopted. These included judgements about its effect on jobs, inflation and trade.

195 of 199

The euro cont.

Blair suggested a national referendum. He knew that opinion polls showed the British people currently to be against the euro but he believed that as had happened in 1975, the people could be educated into saying 'yes'.

Clare Short, a Cabinet minister at the time, later suggested that Blair at this point was even willing to step down as Prime Minister in favour of Brown, if Brown would commit himself to the euro.

In June 2003 Brown declared that the euro came nowhere near meeting the five tests and so there was no need for a referendum. He had economic and political logic on his side. The economy was performing well under his stewardship so there was no point in putting it as possible risk by adopting the euro.

196 of 199

The rebate issue.

The biggest concern that had hung over Britain and Europe's relationship since 1973 was the size of the annual budget paid by member states to Europe. Britain felt that it had been discriminated against and made to pay a disproportionately high amount.

In 1984 Thatcher had won an annual rebate for Britain but there were strong complaints among many member states, including France which argued that rebates offended the various treaty obligations which members had signed.

In 2004 this issue forced itself to the foreground when the EU was enlarged to include the state of Eastern Europe. Blair told Europe that Britain was 'prepared to pay its fair share of the costs of enlargement' but that he would not give up the rebate and would use the veto to block any attempt to force him to do so.

One of Britain's strongest argument was that the UK never actually received its full rebate because 66% of any EU funding that it was granted was deducted from the rebate. The result was that in net terms the UK have never received any funding from the EEC/EU since it had joined. It always paid out more than it got back.

197 of 199

The rebate issue cont.

In 2004 Blair stated that 'the rebate and the Common Agricultural Policy are inextricably linked and therefore cannot be fundamental change in one unless there if fundamental change in the other'. CAP had never worked in Britain's favour.

In 2004 Britain received less from CAP than any of the major nations of Western Europe.

Blair's fighting words were not matched by actions. He did not get the reform of CAP he wanted and when Europe closed ranks against Britain in 2005 and demanded it increased its budget contributions, he gave in.

One of Blair's last acts as PM on the European stage was in December 2006 when he negotiated away Britain's rebate and Britain's annual contribution rose to £7 billion.

198 of 199

European directives.

Blair took the pressure from Europe too seriously and legalistically. Most other European governments tended to ignore EU regulations that they did not like.

By 2004 France had over 400 outstanding complaints against it regarding its refusal to comply with directives. This did not worry the French and it did not embarras them in their relations with the EU.

British officials however rushed to carry out European directives and their speed and enthusiasm confused and amused the French. Britain is the most compliant of all the member states.

During 2006 the EU imposed over 3000 regulations and directives on Britain. None of these were discussed by the Westminster Parliament

80% of the new laws that came into force in Britain during Blair's years as Prime Minister were laid down by the EU.